Nubank plans to consolidate acquisitions in Latin America

A month after recording its “strongest quarter” in history, Brazilian neobank Nubank has shared plans for consolidation in Latin America.

Already one of the largest digital financial service platforms in Latin America, the company plans to continue expanding by picking up acquisitions at low prices, the company’s CEO  told the Financial Times. 

The neobank secured a $650m credit line to expand across Mexico and Colombia in April and is now looking to maximise on the impending “shakeout” in the area’s fintech sector.

“There’s going to be a rationalisation of some of the fintechs that are in the market, there will probably be some consolidation,” Nubank founder and CEO David Vélez told the Financial Times. 

“This will enable the survival of the fittest.”  

The CEO pointed to there now being “about 40 different digital banks” in Brazil.

“It probably was too much,“ he said.

“Consumers will not have 20 different payment apps in their smartphones.

“It’s just too complex. You might have three or four, not 20.”

Vélez confirmed the company will be looking to do more mergers and acquisitions, noting that some conversations it was having around a year ago are now coming back at a 70 per cent discount.

The São Paulo-headquartered group has consistently led the pack in fintechs in Latin America, giving millions of poorer citizens in South America their first bank account and more than tripling year-on-year to $877.2m in the last quarter.

An initial public offering in New York last December valued Nubank at above $40bn, briefly making it the most valuable financial institution on the continent before shares fell by two-thirds this year, bringing it down to around $15bn.

Nubank has already bought several start-ups in the last few years and expanded its initially credit-based offering to include insurance, investments and crypto.

“The funding environment is certainly going to be a bit harder than what you saw the past few years,” Vélez said.

He explained that he was not worried, though, saying that US investors in the past have asked what would happen in the bad times.

“That is the wrong question to ask,” he said.

Referring to the country’s battles with inflation and recession, he said, “Brazil has always had bad times.”