Nubank’s mega funding round makes it the most valuable neobank globally at a more than $10 billion valuation

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US investment firm TCV led the mega Series F round in the neobank, with participation from existing investors including Tencent, DST Global, and Sequoia Capital, per Reuters. The round, Nubank’s seventh raise, more than doubles the startup’s previous valuation of $4 billion, secured in October 2018.

In total, Nubank has now raised $820 million in funding. Notably, the startup had been expected to raise as much as $1 billion from Japanese investment behemoth SoftBank, but those talks broke down, according to The Wall Street Journal citing people familiar with the matter.

Here’s what it means: Nubank’s latest big-ticket round demonstrates its rapid ascent in its home market and provides it with an opportunity to expand into the rest of Latin America.

Such has been the startup’s growth that it’s now Brazil’s sixth-biggest financial institution (FI) by customers. Nubank initially launched with credit cards, and the traction that business has gained has made the startup the fifth-biggest credit card issuer in the country, per Bloomberg. In the past year, it’s also aggressively expanded its product suite, adding personal loans and cash withdrawals to NuConta, its digital savings account. And in a move away from its focus on individuals, it’s planning to roll out business accounts for small business owners in Brazil, reports Reuters. In total, the neobank has now attracted 12 million customers across its range of products. Brazil has a population of over 200 million and, crucially, 55 million people in the country are unbanked, meaning Nubank still has a long growth runway in its home market even before it considers expansion opportunities in other markets.
Despite the continued growth opportunities in Brazil, Nubank’s also planning expansion into the rest of Latin America. In May, the challenger bank opened an office in Mexico as a precursor to launching services in Latin America’s second-most populous country, marking its first expansion outside of Brazil. And in June, Cristina Junqueira, Nubank’s cofounder, said the startup will launch services in Argentina by 2020, per Bloomberg. Like Brazil, Mexico and Argentina have huge unbanked populations, as does the rest of the region. In Mexico, for instance, around 42 million people are unbanked, while internet penetration stands at around 70%. This combination offers the startup favorable conditions for launching its digital products.

The bigger picture: Nubank’s funding is evidence of Latin America’s burgeoning fintech ecosystem, and we’re likely to see more startups secure huge backing in the near future.

Latin America’s huge unbanked population makes the region fertile ground for fintech — and that’s going to drive massive funding for these players. Nubank’s latest raise makes it the highest valued private tech company in the region, per PitchBook Data cited by The WSJ.

However, it’s not alone in securing sizable funding in recent months: Creditas, a Brazilian fintech that provides secured personal loans, nabbed $200 million from SoftBank last month, for instance. Like SoftBank, Goldman Sachs has turned its focus to the region, seeing it as "a significant area of future growth," Gaurav Seth, a partner at Goldman who leads its business in the Americas, told Bloomberg.

This makes sense given how successfully fintechs in developing economies have targeted the unbanked. In Asia, in particular, the likes of Tencent and Alibaba have developed digital platforms that enable them to provide financial services to Chinese consumers in ways that are out of reach for incumbents.

And while the likes of Nubank remain far from achieving anywhere near the kind of traction their peers in China have enjoyed, we anticipate they’ll continue to scale rapidly, which in turn should drive a significant uptick in funding in the region.

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