Nubank’s story is credited for its design and branding. However at its core, it is a bet against

Brazil’s traditional banking model. As banks began to form in Brazil, retail banking was

dominated by a small group of large financial institutions. This has led to credit cards which

could have annualised rates above 400%, with monthly account and card fees on top.With

current models, large branch networks and high staffing costs were unavoidable and customers

faced with little choice. Nubank’s mobile-first, low-cost approach set out to attack this structure.

​

The core idea was simple: strip out branches, automate anything that software can handle, and

pass the savings back to customers in the form of lower fees and a smoother user experience.

Nubank launched with a zero-fee, app-managed credit card and later added digital accounts,

loans, insurance and investments. By 2025 it will manage around 127 million customers across

Brazil, Mexico and Colombia, with an activity rate of roughly 83%. In Brazil alone it serves more

than 60% of adults and has over 110 million customers, making it one of the country’s largest

financial institutions by customer count. Achieving that kind of reach in such a short period

would have been impossible with a branch-led model. Nubank’s cost to serve each active

customer is about $0.90 per month, versus roughly US$13.40 at typical banks.

​

If you look at what Nubank is saying and doing over the last 12–18 months, we can see their

growth plan: create more value out of Brazil, to drive Mexico and Colombia toward the kind of

inflection Brazil went through, create a platform it can deploy globally. It's uncertain whether

they have capacity to pull that off without breaking their risk profile or diluting returns. Since

Brazil still acts as the profit engine for the rest. In Mexico, Nubank has passed 13 million

customers and now reaches around 14% of the adult population. Colombia is smaller at just

under 4 million customers, but both markets generate solid revenue despite much thinner

product sets. At the same time, Nubank is rolling out a global credit platform that adapts to local

regulation. “Nu Control” in Colombia, a product designed to work within the country’s interest

rate cap while still expanding access to credit. Suggesting they aren’t simply copy-pasting

Brazilian products.

​

However, looking at its competitors like Mercado Pago in Argentina who have embedded in the

broader Mercado Libre ecosystem. Serving tens of millions of active fintech users across Latin

America, it has become the default digital wallet for firms and consumers. It leans more on

payments, merchant tools and marketplace synergies than on full-service retail banking, while

Nubank is more exposed to credit and deposit-taking. At scale, that makes Nubank’s low-cost

model more sensitive to funding costs, capital requirements and credit quality than a pure

payments wallet. The question is if Nubank can keep holding significantly more balance-sheet

risk than a competitor whose revenue mix is more diversified.

​

PIX was the first serious challenge to Nubank’s model. PIX is Brazil’s nationwide instant

payment system that lets people and businesses move money between accounts in seconds,

24/7, at little to no cost. Since launching in 2020, PIX has grown rapidly and now accounts for

a large share of payment transactions, significantly outpacing debit cards. The PIX fees

average around 0.22% per transaction versus more than 1% for debit. Nubank has managed

to turn this threat into an advantage. It now processes more than 2 billion PIX transfers every

month, roughly a third of all PIX traffic in Brazil, becoming many users' main transaction hub

rather than just a secondary card. Benefiting Nubank greatly with more app activity generates

better behavioural data for credit decisions. When integrated well, PIX becomes a growth

accelerant however when managed poorly, it exposes how fragile any model is if it leans too

heavily on a single revenue stream.

​

Credit cycles are the repeating phases of expansion and contraction in lending that happen as

the economy moves through good and bad periods. These cycles hit Nubank’s middle-income

customer base hardest as they are more exposed to inflation. Fintechs like Nubank now hold a

substantial share of Brazil’s credit card market, which means an increasing slice of consumer

credit risk sits on relatively young balance sheets. Nubank’s advantage lies in its ability to adjust

limits, pricing and collections rapidly using behavioural data at very low marginal cost. At the

same time, stricter regulation as the Central Bank of Brazil has raised capital requirements and

governments have strengthened consumer rights and pushed open finance initiatives. For

Nubank, this will mean higher capital needs and lower headline returns. As Nubank becomes

systemically important, regulators are likely to treat it more like a traditional bank. That will

reduce its freedom to take risks but provide stability and long-term position.

​

Investors and the public are torn on Nubank’s stage. Some believe its data advantage, strong

brand and ultra-low cost base give it years of profitable growth, even if margins get squeezed.

Others worry that so much exposure to middle-income customers, and such heavy dependence

on Brazil as a profit engine, leaves it vulnerable in a downturn. For them, Nubank’s push to build

a global platform looks less like a natural evolution and more like the first signs of strategic

overreach and future strain under real economic stress.

​

In the end, the biggest risk is not that the mobile-first, low-cost model suddenly breaks, but that

Nubank’s own success leads it to overreach by stretching its credit book too far or by expanding

into new markets too quickly. If the company continues to use its data and AI capabilities to

refine risk selection and product design, it should be able to absorb regulatory pressure and

credit cycles. PIX, credit cycles and regulation will not be the result of Nubank's downfall; they

will help strip away from Nubank's brand. The real test is whether it can sustain itself and

discipline even after the purple sheen wears off.