Nu Holdings Ltd., the Brazilian digital bank that counts Warren Buffett’s Berkshire Hathaway Inc. among its biggest stockholders, is betting big that its high-yield savings accounts will stoke growth in Latin America’s second-largest economy.
Within a month of launching the product, the company had 1 million customers enrolled in its “Cuenta Nu” accounts and expects the product to be “pivotal for the growth in the number of customers,” said Ivan Canales, head of Mexico for Nubank. Overall, the company has hit 3.2 million customers nationwide with minimal marketing expenditures, he added, with two thirds of new accounts in Mexico coming through customer referrals.
Nubank, as the company is known, has invested $1.3 billion in its operations in Mexico while still holding $2.4 billion in excess cash at the end of the first quarter. In keeping with its burgeoning operation in Mexico, the company on Thursday opened its new country headquarters in the affluent Polanco neighborhood, complete with perks like a health center, rooftop lounge and foot massage machine. Nubank works in a hybrid modality, with teams asked to attend only one week of every eight.
The company plans to first boost the number of customers in Mexico and later seek to increase revenue per customer. Nu is working to adapt its Brazil product offerings to the Mexican market, added Cristina Junqueira, the company’s co-founder and chief growth officer, in an interview at the new office.
“Investors are valuing many avenues of growth, one of them is growing customers, and in Mexico we’re still in the very beginning,” she said. “We just reached 80 million users in Brazil, one of two adults. There’s nothing stopping us from getting to those levels here in Mexico, too.”
In Mexico, the unit economics are different from those in Brazil, as people don’t pay the full amount on their credit cards at the end of the month and that leads to a lot more revenue from interest, Canales added.
Shares of Nubank rose as much as 2.7% on Friday. The company will publish its second-quarter earnings results Aug. 15 after market close.
Other key points from the interview:
- The company invested $300 million last year in Mexico, bringing its total to $1.3 billion. It declined to say how much it was investing this year
- Nu isn’t eyeing entering new markets, but rather is focusing on growing in Mexico and Colombia, Junqueira said
- While there were some headcount reductions in June, those were only in Brazil and a result of merging teams following a restructuring and some discontinued projects. None of the cuts were in Mexico
- The company is adapting fraud technology from Brazil to its Mexican operations, where fraud levels are also high
--With assistance from Cristiane Lucchesi.
(Adds Friday share trading, second-quarter earnings schedule in seventh paragraph. An earlier version of story corrected spelling of Buffett in headline)