As it prepares to list on the NYSE this week, Brazilian lender Nubank could enter history not just for banks but for all companies going public.
With 48 million customers and over $1 billion in revenue, the modern fintech lender started out by giving no-fee credit cards to Brazilians who were accustomed to waiting months and paying high fees to get approved for a loan.
"You're going through all that experience to then pay 15%-a-month interest rates and pay hundreds of fees," founder David Vélez said at a CB Insights conference in New York in 2018. "How is it possible you’re doing that?"
Nubank's easy-to-get and popular purple credit card quickly caught on and earned it the backing of Warren Buffet as well as pushed the lender ahead of most traditional banks in Brazil and South America.
Estimated to raise $2.6 billion for a valuation of $41.5 billion, Nubank could be the fifth-largest IPO to take place in the U.S. this year, Renaissance Capital Vice President of Research Nicholas Einhorn told the Wall Street Journal.
Challenges include the lower revenue generated from individual clients due to the no-fee model — Vélez told Reuters that the biggest traditional banks of Brazil generate more than 10 times the revenue per client — as well as a number of new startups that are popping up in the country after seeing Nubank's popularity soar.
When making an amended filing with the SEC on Nov. 30, parent company Nu Holdings Ltd. lowered its planned price range from $10-$11 a share to $8-$9.
That said, the model pioneered by Nubank in South America is clearly catching on as the no-fee model appeals to those who would have otherwise been rejected by traditional banks and attract larger numbers of customers.
"[Traditional banks] are very, very slow in adopting new business models and new business products, especially products that meet the needs of the underserved and the excluded," Getúlio Vargas Foundation finance professor Lauro Gonzalez told the WSJ.