Nu: Brazil's radical upstart bank

In the world of banking, transformative companies are rare. But when they come along, they can have a big impact. Nu Holdings is one such business. It is upending the status quo in Latin America, tackling a banking sector that is dominated by a cartel of big banks that treat customers poorly. Nu is succeeding through a fanatical dedication to the customer and a relentless drive for efficiency.

Known simply to its 127 million customers as Nu, the firm is an unlikely story of an outsider successfully taking on a banking oligopoly and in the process creating a blueprint for the future of financial services across Latin America, and one day potentially the world. To appreciate Nu's achievement, one must understand the environment it entered.

For decades, Brazilian banks were known for treating customers as little more than a source from which to extract money. Almost a third of the adult population had no bank account at all. In mid-20th century Brazil, protectionist policies enabled a group of five politically connected banks to grow and control nearly 90% of the market. This bred a culture of lazy profitability. Brazilian incumbents maintained net interest margins of around 14% (a key profitability metric in banking), compared with roughly 3% in the US and Europe. They charged astronomical fees and interest rates on credit cards that frequently ran into hundreds of percent per annum. Opening an account was famously arduous and could take days. The atmosphere in branches, marked by armed guards and suspicion, acted as a filter that excluded many. By 2013, 60 million adults were unbanked.

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The spark that created Nu came in 2012 from David Velez, a Colombian-born investment professional who had moved to São Paulo to lead the Latin American office of venture-capital firm Sequoia. His attempt to open a local bank account took months. When Sequoia withdrew from Brazil because of a perceived lack of investable technology talent, Velez saw his opening. He realised that the lazy, high-cost models of incumbent banks was a vulnerability to attack.

Velez assembled a small founding team: himself as the strategist, Cristina Junqueira (an experienced banker who knew the Brazilian banking 2022 2023 2024 2025 2026 system well), and Edward Wible (an American engineer who built the bank's technology from scratch). This was perhaps Nu's greatest advantage because many big, old banks run off decades-old software systems that make innovation and cost-cutting difficult. Building from the ground up using cutting-edge technology gave Nu an immense lead that others couldn't match.

For a traditional Brazilian bank, it costs between $12 and $15 per month to service a customer; Nu's cost is about $0.90. This saving is its bedrock. It allows it profitably to serve the unbanked that the incumbents had deemed too expensive to touch.

Nu's radical approach

Nu's first product was a simple, no-fee credit card that rapidly became very popular largely through word of mouth and its radical attitude to customer satisfaction. In a market where banking was synonymous with abuse, Nu's Net Promoter Score (NPS) soared into the 90s (an NPS can run from -100 to +100, so a score in the 90s is incredibly high). The company didn't just provide a service; it also built a movement based on fairness and servicing the part of the population that had been neglected. This organic growth meant it could acquire customers for a fraction of the marketing spend of competitors.

The sceptics' biggest concern was credit risk. Nu's solution was the “low and grow” model. It would issue micro-limits, sometimes as low as £10, to unknown borrowers. This was effectively a test-and-learn strategy. By observing real-time payment behaviour and smartphone data, Nu could predict defaults more accurately than traditional credit bureaux can. As of late 2025, Nu's return on equity (ROE) reached a record 31% (an enormously high number in banking, where the ROE is often closer to about 12%), proving that it could lend to the underserved more profitably than the incumbents could lend to the elite.

How Nu is exporting its model

The Nu model is now being exported. Mexico and Colombia represent the next chapters of the story. In Mexico, where cash is still king and banking penetration is even lower than it is in Brazil, Nu reached 13 million customers in two years. By partnering with retail giant OXXO (which has over 23,000 locations across Mexico) to allow for physical cash deposits, it has overcome its lack of a branch network.

Early this year, Nu received conditional approval for a US National Bank charter in an attempt to move towards the cash remittance corridor between North and South America. Nu is no longer just a new Brazilian bank; it is spreading across the continent.

Nu's shares are not cheap in a traditional sense. Trading at more than seven times book value, they command a significant premium over banks such as JPMorgan, which typically trades at around 1.2 to 2.5 times. But comparing Nu to a traditional bank is a category error. Given its efficiency and revenue growth, it functions more like a high-margin software business. The quality of the management team and the structural cost advantage make it a best-in-class operator. At current levels, the stock is perhaps priced for perfection, reflecting its high-octane growth trajectory. For the patient investor, however, any significant pullback in the share price would represent an enticing entry point into what is arguably the most efficient banking machine on the planet.

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