Thanks. They have been pretty good about it so far given it is typically lower-income borrowers albeit I know Citi was talking about provisioning not being high enough and sign of some stress in portfolio
Exactly I was wondering if there was something in their model that would lead to lower defaults/bad debts vs other local banks, when times go bad. Otherwise one could argue they just seemed to be doing well when things are going well , but have actually taken on more risk.
So non performing loans rose from 2% in early 21 to 3.5% in mid 23, has come down a touch since but Stage 3 loans i.e/ just before NPL risen quite sharply 6% to 9% over last year. Nubank are data-driven and careful with who and how much they extend using data eg. on the person who referred you to them.
Also Brazil has been mixed big on macro in recent years.
A brilliant answer to an existential question, "what's fintech?" when everybody calls themselves fintech.
From what I can experience as a consumer, traditional banks are not just talking the talk; dinosaurs like Natwest and Lloyds are pretty good at "digital", so the tech advantage is shrinking.
Then there's "your margin is my opportunity": international payments are still crazy expensive but I can't imagine it's a tech issue. One day the traditional banks will accept that the churn is worth more than the profit... but it doesn't look like the day is today!
There are also many geographical differences—I keep hearing about them on the Demystify podcast—in EM countries, it's not about eating the banks' cake. They're growing the market as many people were underserved.
Indeed. Nubank actually grew the pie as much as eating legacy banks lunch by bringing Brazil's unbanked into the system. Yes, its something I wonder with international payments. Banks are losing so much share when do they start cutting their crazy pricing - it feels cultural and Innovators Dilemma as much as tech disadvantage.
On mobile apps I am pretty happy with the legacy banks. What I want from the neobanks is stats on how much time the kids are spending on their neobank apps and doing what. It is hard to believe that anyone would spend as much time on their Revolut app as on Substack :)
The problem with neobanks, at least in the US, is that none of them have a bank charter, and so they have to rely on partner banks to provide services. It’s not a great business model, and no neobank has matched the success/size of legacy banks. Neobanks promise cool tech, and that matters for some customers, but CAC is still very high.
Great points. In other countries they have gone the bank charter route albeit for all the hype they still have to scale credit risk and old fashion banking skills
Thanks.
There probably is IMHO
Well researched and well written. Enjoyed reading this
Thank Karim. Happy New Year!
Great post, regarding Nubank’s success any insights into the credit quality of borrowers and bad debts?
Thanks. They have been pretty good about it so far given it is typically lower-income borrowers albeit I know Citi was talking about provisioning not being high enough and sign of some stress in portfolio
Exactly I was wondering if there was something in their model that would lead to lower defaults/bad debts vs other local banks, when times go bad. Otherwise one could argue they just seemed to be doing well when things are going well , but have actually taken on more risk.
So non performing loans rose from 2% in early 21 to 3.5% in mid 23, has come down a touch since but Stage 3 loans i.e/ just before NPL risen quite sharply 6% to 9% over last year. Nubank are data-driven and careful with who and how much they extend using data eg. on the person who referred you to them.
Also Brazil has been mixed big on macro in recent years.
But yeah they get smacked in big recession
A brilliant answer to an existential question, "what's fintech?" when everybody calls themselves fintech.
From what I can experience as a consumer, traditional banks are not just talking the talk; dinosaurs like Natwest and Lloyds are pretty good at "digital", so the tech advantage is shrinking.
Then there's "your margin is my opportunity": international payments are still crazy expensive but I can't imagine it's a tech issue. One day the traditional banks will accept that the churn is worth more than the profit... but it doesn't look like the day is today!
There are also many geographical differences—I keep hearing about them on the Demystify podcast—in EM countries, it's not about eating the banks' cake. They're growing the market as many people were underserved.
Happy new year!
Indeed. Nubank actually grew the pie as much as eating legacy banks lunch by bringing Brazil's unbanked into the system. Yes, its something I wonder with international payments. Banks are losing so much share when do they start cutting their crazy pricing - it feels cultural and Innovators Dilemma as much as tech disadvantage.
On mobile apps I am pretty happy with the legacy banks. What I want from the neobanks is stats on how much time the kids are spending on their neobank apps and doing what. It is hard to believe that anyone would spend as much time on their Revolut app as on Substack :)
Happy New Year and hope you had a good break!
Thanks, I had no idea kids would do that ... Maybe neobanks gamify regular savings, and they're building their own college money stack (I doubt it)
Yeah - kids really a reference to my old age :)
They are probably buying Fartcoin!
The problem with neobanks, at least in the US, is that none of them have a bank charter, and so they have to rely on partner banks to provide services. It’s not a great business model, and no neobank has matched the success/size of legacy banks. Neobanks promise cool tech, and that matters for some customers, but CAC is still very high.
Great points. In other countries they have gone the bank charter route albeit for all the hype they still have to scale credit risk and old fashion banking skills
Banger 🔥
Do you think there’s space for a ‘White Glove’ retail
Yeah could be.