Brazil may not be an obvious place to look for the future of retail banking. Yet in just over a decade Nubank, based in São Paulo, has transformed its home market by offering cheap, branchless banking to millions of customers ignored by the big players. Its market value of $56bn leaves it vying with Itaú Unibanco for the title of Latin America’s biggest bank. In 2024 Nubank made $2bn in profit, double the previous year’s figure. Having conquered Brazil, and with the country’s economy now struggling, it has set its eyes on new markets.

When Nubank was founded in 2013, Brazilian banking was an oligopoly: six lenders controlled nearly 80% of the industry’s assets. Customer service was an afterthought. Opening an account took cartloads of paperwork. Customers endured fees on everything from wire transfers and credit-card purchases to cash withdrawals. In 2015 the gap between what Brazilian banks paid depositors and charged borrowers was 31 percentage points, compared with 2.9 in China and 3.8 in neighbouring Argentina. For many poor Brazilians, or those in rural areas, a bank account was out of the question.

Nubank’s first offering was a no-fee credit card that customers could apply for and manage on their smartphones. (It assessed their creditworthiness from the information they provided and their social and buying habits.) In 2017 the firm secured a banking licence and started to take deposits, moving into personal loans, insurance and small-business banking. By the time Nubank went public in 2021 it had 48m customers, some 5m of whom had never had a bank account or credit card before. Today it has over 100m in Brazil, more than half the country’s adult population.

Several factors fuelled Nubank’s rise. Its offer of mobile banking was well timed: from 2013 to 2018 the share of Brazilians with smartphones rose from 15% to 60%. Doing without branches kept costs low: Nubank reckons it spends 85% less per customer than traditional banks. Regulatory changes helped, too. From 2013 Brazil’s central bank began to make it easier for startups to offer credit, open accounts digitally and get hold of better credit-scoring data. Pix, an instant-payments system launched by the central bank in 2020, sped the adoption of digital banking.

The firm has rivals, such as PicPay and C6 Bank, a pair of newish players. MercadoLibre, an Argentine e-commerce giant active across Latin America, is expanding into credit and payments. Conventional banks, slow to adapt at first, are now investing heavily in digital services. A bigger threat, however, is Brazil’s dicey economy. Gustavo Schroden, an analyst at Citibank, says that Nubank’s focus on consumer loans leaves it more exposed to economic cycles than other financial institutions. Rising interest rates could push up defaults, squeeze margins and slow growth.

Heavy exposure to Brazil’s fortunes is one reason Nubank is now heading abroad. David Vélez, the firm’s co-founder and boss, says that his company is targeting markets with similar inefficiencies to Brazil’s, including concentrated banking sectors, poor customer service and lots of people without accounts. It moved into Mexico in 2019 and Colombia in 2020, where Mr Schroden says it is trying to build market share by offering competitive rates at the expense of profit margins. In December Nubank paid $150m for 10% of Tyme, a digital lender that operates in South Africa and the Philippines.

Mr Vélez points out that Nubank has weathered recessions, corruption and a presidential impeachment. Operating in Brazil, he argues, has made the bank “antifragile”, strengthening its ability to adapt. If he is right, Nubank could make banking in poorer countries fast, cheap and entirely digital. People in many far richer places would settle for that.