Brazilian startup Nubank received $80 million in a final round of funding. One of Brazil’s first financial tech startups, Nubank provides customers with a “no-fee” credit card.
Moscow-based venture capital firm DST Global led the round with its first-ever investment in Brazil. Additionally, Nubank scored first-time investors in the region Sequoia, Founders Fund, and QED.
Even before this latest round of funding, Nubank held a valuation of $500 million.
So far, Nubank has received 7 million credit card applications, with 500,000 already on the waiting list. Rather than charging fees upfront, the financial tech startup makes a profit on transaction charges of 1.5 percent and interest on unpaid balances. About 75 million purchases have been made on Nubank credit cards to date.
The young company conducts all of its marketing via viral social media campaigns and word of mouth. Major Brazilian banks Bradesco and Banco de Brasil have tried to rival Nubank with their own app, Digio, but haven’t had nearly as much success.
In addition, Nubank receives a foreign exchange fee for purchases made abroad. Its credit card has already been used in over 170 countries.
Looking ahead, Nubank’s next product will likely be a rewards service for air miles and other kinds of credit.
An Economic Climate for Investment
Although Brazil’s critical economic situation may not seem risky for investors, this Brazilian startup successfully taps into the giant credit card market. With over 100 million credit cards in circulation, Brazil is easily South America’s largest credit card market.
However, the country’s five largest banks are reeling from the economic recession and trying to cut costs. These five banks control 95 percent of all credit cards in the country. But, credit card customers are fleeing from harsher terms and turning to the “no-fee” services offered by small banks and startups like Nubank. Unlike big banks, customers don’t have to pay any upfront fee or service charge to use the credit card.
Finally, venture capital firms are enjoying the lower valuations on businesses before Brazil’s economy turns back up.