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The Brazilian neobank is launching its annual-fee-free Nu credit card in Mexico to a waitlist of 30,000 people, per TechCrunch. Mexico was the first market Nubank expanded to outside of Brazil, opening an office in the country last year under the subsidiary “Nu.”
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Nubank anticipates that it will be able to translate its strong success in the Brazilian market to the Mexican market by tapping an opportunity that few others have. With 22 million users, Nubank is the sixth-largest financial institution in Brazil.
It’s also the highest-valued neobank in the world, with a valuation of $10 billion, making it the best example of a neobank posing a legitimate threat to incumbents. And according to CEO David Vélez, its success is owed largely to providing an uncommon service, which it can also do in Mexico: “Personal finance tools in both Brazil and Mexico are so limited that Nubank has not had to spend a dollar on customer acquisition,” he told TechCrunch.
Also supporting Nubank’s Mexico endeavors are the market’s favorable fintech regulatory landscape and demographics, which form an opportune environment for neobank growth.
Regulators are looking to spur financial inclusion with fintech-friendly regulations. Banks’ lack of transparency and past scandals have contributed to low consumer trust and low financial inclusion in the country.
But now, Mexico’s finance minister Arturo Herrera is spearheading efforts to increase financial inclusion, and the government is promoting banks and fintech to reduce cash in circulation to cut down on money laundering and bring more people into the formal economy. It has also passed a law that will provide a regulatory framework for players looking to create new fintechs.
The country has a large underbanked population that is primed for neobank adoption. An estimated 42 million consumers in Mexico are unbanked, and half the population is under 24, creating a wide base of young, tech-savvy consumers to which neobanks can cater.
What’s more, internet penetration stands at 67% in the country, which is almost 10 percentage points higher than the global average — this makes digital-first services like neobanks accessible to the majority of the Mexican population.
Nubank is wise to further target underbanked consumers in Mexico with a credit card, and its experience in the space should set it apart. Just 15% of adults in Mexico have access to a credit card, and only 3% of credit applications from middle-class consumers are approved.
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This has attracted some competition: Homegrown neobank Klar aims to provide underbanked Mexican consumers with an alternative to traditional credit card and debit services — to do so, it assesses creditworthiness on the basis of account history rather than going through a credit bureau. It also boasts a 5-minute account opening process and no minimum balance or transfer fees.
But Nubank’s experience in rolling out a credit card product to underbanked consumers in Brazil, coupled with its already strong brand recognition, should give it a leg up on this competition. And offering a credit card that’s geared toward underbanked consumers could be a good way for Nubank to onboard customers and convert them to using its other account products.
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