Fintech CEO details the opportunity to relieve the ‘pain in consumer banking’

Nubank CEO David Vélez joins Yahoo Finance Live to talk about his company’s IPO listing, its global growth outlook, and its ability to develop a customer base in Brazil.

Video Transcript

BRIAN SOZZI: One of the biggest IPOs of 2021 has arrived. Brazilian digital bank Nu Holdings has raised $2.6 billion, valuing the company at a staggering $41 billion at its IPO price. That makes it the world’s most valuable standalone digital bank. The company does business as Nubank in Brazil, Mexico, and Colombia, and was backed in June by Berkshire Hathaway’s Warren Buffett.

Joining us now for more on the company is Nubank’s founder and CEO, David Vélez. David, good to see you. Congratulations on the debut. I know it’s been a long time coming.

For those not familiar with Nubank, set the scene for us in some of these countries you operate. What is it like for a consumer to do banking in some of these countries, and why are they coming to you?

DAVID VÉLEZ: Thank you. Listen, it’s very painful. There is a lot of pain in consumer banking. A lot of these countries traditionally have had five banks that own 80% to 90% of all the investments, lending, credit, savings. So for a very long time, there were really no alternative for consumers. They were basically at the mercy of the same five banks, which ultimately meant paying some of the highest fees in the world, some of the highest interest rates in the world.

And then that’s for the people that could actually open an account. Then you had over 40% of the population that were completely outside the system, which meant even more pain and a huge opportunity for entrepreneurship.

BRIAN SOZZI: David, I imagine it was an exciting day back in June when Warren Buffett invested in your company. Did you get a chance to talk to him?

DAVID VÉLEZ: I did, yeah. I had the pleasure to meet him. I’m a big fan of him, always been. He’s a phenomenal entrepreneur, phenomenal investor. So we were very proud of having him as an investor.

BRIAN SOZZI: Is he still an investor now, and what did he tell you?

DAVID VÉLEZ: He asked some really good questions. He put me on the spot, and he had done the homework on the company. So we were very excited to have this conversation. And, of course, he’s along for the ride, so we’re very happy.

JULIE HYMAN: David, it’s Julie here. I want to ask about your customer base a little bit because, as you say, you are increasing accessibility to banking for your customers. I’m curious what some of the opportunities but also some of the challenges might be with these customers. Presumably, I’m guessing– you correct me if I’m wrong– we’re talking about smaller deposits perhaps per customer. So are you dependent on it sort of being a volume business, on getting a lot of customers?

DAVID VÉLEZ: Yeah, I mean, scale is important, obviously, to be able to have a lot of efficiency, to then pass that efficiency back to the end consumer via no fees and lower interest rates. So partly what we’re trying to do here is scaling with a really, really good product. Culturally, we’re a company that is consumer obsessed. We focus very much on that user experience.

And consumers become our biggest ambassadors. They do all the branding for us. That translates into a customer acquisition that is one of the lowest CACs that we know of in the world, one of the highest Net Promoter Scores that we know of in the world. And, ultimately, that viral growth brings scale, which, again, we can pass back to the consumer via better, better fees and interest.

And this is both consumers that had bank accounts before that are tired of dealing with those big banks are coming to us and then also a lot of consumers that had never really had access that were putting their cash under the mattress and are excited to be able to invest well, to get a loan, to really deal with somebody that is thinking about them every day.

BRIAN CHEUNG: David, it’s Brian Cheung. If you’re not in the banking business, you should sell jackets because those jackets are pretty sweet. I want one. But I want to ask about–

DAVID VÉLEZ: We’ll get you one.


BRIAN CHEUNG: –focus group.


Where are the areas of focus? Because I think one attractive offering, I imagine, for your customers are perhaps cross-border payments, the ability to transact with other countries, for example. How do you feel that plays into the strategy going forward after this IPO?

DAVID VÉLEZ: Yeah. So we’re still very focusing in Brazil, which is our core market, expanding our entire portfolio. We started with credit card. Then we launched savings, lending, investments. We put out an investments platform that offer over 400 different investment funds to consumers in Brazil, and we’re integrating that into our app. Then with credit, we also have 1.1 million small businesses and microentrepreneurs, and we’re starting to offer them more and more products.

And very recently we also opened our customer base for third-party financial and nonfinancial services partners. So for example, we just added over 10 different e-commerces that can sell their e-commerce goods inside our platform.

So for Brazil, we’re very focused on that expansion. And then the other vector of growth is new markets where we are in Mexico and in Colombia. In both markets, we started with a credit card first. Both are growing very well. In Mexico, we have just become the largest credit-card issuer in the market in only about 10 months. So those are the key areas of growth for the next few years.

BRIAN SOZZI: You’re a pretty fascinating story yourself, David. Correct me if I have this wrong. So you moved to Costa Rica at the age of nine. You were working in your dad’s button company at the age of 12. I mean, why do you think your path led you into banking?

DAVID VÉLEZ: It’s a great question. Nothing to do between buttons and banking.

I think partly was just the entrepreneurship culture that I grew up with. It was not a big business, but I worked with my dad very, very early on. Seeing him start a business, seeing all the good times that that creates, you know, the challenges that that creates and the good times and bad times, generating a lot of kind of resilience. And I grew up just hearing that the path to do was to start your own business, that you should not have a boss, that you should own your own destiny.

So that was sort of what the radar was looking for as I was able to go to school and ultimately ending up in financial services in New York. But ultimately that brought me back to entrepreneurship. I felt that I needed to start something, and that opportunity sort of presented itself inside a banking branch in Brazil when I was there after I had just moved to try to open a bank account, and I could not understand why that experience had to be so painful.

I talked to all my friends in Brazil. Said forget it. You’re a foreigner. No foreigner comes here and competes with big banks. Banks have been bad. They always will be, and there’s nothing you can do. But I had to try, right? Because of that culture of entrepreneurship, I had to give it a shot and was very lucky to find a really, really phenomenal team. And, you know, the rest is history. We’ve been able to grow very fast over the past eight years.

BRIAN SOZZI: And now you’re– David, now you’re a dad with, what, four kids. And you also signed– you and your wife signed the Giving Pledge. What message did you want to send to them by signing that pledge?

DAVID VÉLEZ: Yeah, so listen, I mean, Latin America is a region of the world with a lot of income inequality, and technology is creating huge opportunities for entrepreneurs to create great companies. Ultimately I think what we wanted to do was to just make sure to lead and pledge to give back all of the wealth that– having had the luck of building a business, send it back to the economies and the communities where we’ve been able to grow, try to invest in education, try and invest in health care, and, ultimately, improving the lives of so many people in Latin America that haven’t really had the chance or the luxury that sometimes we had.

So part of what my wife and I wanted to do was obviously invest the next decades of our life doing really exciting entrepreneurship opportunities that helps people a lot, but at the same time, start creating a bit of an example around Latin American entrepreneurs to give more– to give more and see philanthropy as a really exciting endeavor.

BRIAN SOZZI: Well, we look forward to following your story and the company’s story. Nubank founder and CEO David Vélez, enjoy the rest of the day. I’m sure very exciting.