Foreign fintechs arrive in Brazil to compete for space with Nubank

After Nubank conquered more than 50 million customers, fintechs from abroad opened their eyes to Brazil. This is the case of two giants in the sector in Europe that have the country in their sights and should start working here in the coming months: Revolut and N26. They will be the first large fintechs from abroad to compete with Brazilian startups in the market.

Revolut is the biggest, valued at $33 billion and with more than 15 million customers in 35 countries. Founded in the United Kingdom, the company announced its arrival in Brazil from the second half of this year.

In the same period, the German N26 must also finally start operations. It will be the company’s second attempt to enter the Brazilian market – it “threatened” to arrive in the country in 2019, but ended up giving up in 2020, due to the covid-19 pandemic. The move is not uncommon for the company, which recently withdrew from the US.

Both Revolut and N26 will operate in Brazil, initially, as credit fintechs. Therefore, they can offer payment accounts, credit cards and financing with their own resources. Over time, both plan to expand the scope of services – and do not rule out acquisitions.

The initial focus, however, is on growth with own resources, obtained with venture capital funds. According to data from the financial information platform Crunchbase, the two companies have already raised US$ 1.7 billion each. However, the amount is still less than half of the US$ 3.9 billion received by Nubank during the phase prior to the IPO.

The foreign fintechs arrive in the country at a delicate moment for Nubank, which went public in December 2021. After the success of the IPO, which led the company to be briefly the largest bank in Latin America, today the neobank is traded at less than half of the stock market valuation peak.

In addition to Nubank, Revolut and N26 will have a lot of competition in the Brazilian market, such as Banco Inter, C6 Bank, Neon and Original. The competition also comes from the big banks, with the itifrom Itaú, and the Nextof Bradesco, in addition to the digital account of BTG Pactual.

“We saw many startups being born in Brazil going abroad. These companies do the opposite way, and arrive with great revenue and a lot of technology. They are heavyweights that depend less on the country’s moment, while the higher interest rate affects the capitalization of Brazilian companies”, says Arthur Igreja, an innovation specialist and visiting professor at the FGV.

global account

With billions of dollars in cash, the two fintechs arrive in Brazil in a challenging macroeconomic scenario, with high inflation and interest rates, which reduces the purchasing power of Brazilians and requires greater control over finances. The companies say they look at Brazil with a long-term view and propose to offer mobile applications that help organize spending and improve the relationship with money.

The paths companies intend to follow are slightly different. While Revolut has the ambition to win over the consumer who wants to have a global account that allows the management of assets such as the dollar, euro, cryptocurrencies, among others, N26 is more focused on managing day-to-day expenses.

“In the global context, Revolut wants to be a financial superapp. Latin America was still outside the main operation, and now Brazil and Mexico have entered the company’s radar. Our proposal is to bring ease and access to financial solutions, regardless of the country’s economic scenario. In Brazil, we have a very competitive market for fintechs, but not yet with the best solutions”, says Glauber Mota, president of Revolut in Brazil.

A graduate of BTG Pactual, the executive believes that the country does not have, for example, good foreign exchange solutions for travel – a resource he considers Revolut’s strong point.

Waiting list

After announcing the landing in Brazil in 2019 and then going back, the N26 is now in an advanced stage of testing to start its operations in the country. With a waiting list of more than 200,000 customers, around 2,000 people participate in a trial of the company’s financial services. Worldwide, the company has more than 7 million customers.

“The first generation of fintechs improved the consumer’s relationship with banks. But the relationship between Brazilians and money still needs to be improved. Many still spend more than they earn and don’t even like to think about money. We want to solve this”, says Eduardo Prota, president of N26 in Brazil.

N26 also prepares a solution to guide financial decisions, such as the allocation of investments, digitally resuming the role of the bank manager – but without encouraging the contracting of products and services that do not make sense just to meet goals. “We want to offer supported financial services to make the best decisions,” says Prota.

The potential market for fintechs like Nubank, Revolut and N26 is still large. According to research carried out by the consultancy Accenture in partnership with N26, one in five people who are banking and insurance customers have a digital bank account in the world, totaling 450 million customers. The estimate is that this number would have the potential to be tripled in the coming years.

“People follow a trend of using multiple banks, if only to test what the main bank will be in the future. The entry barrier to opening an account is minimal. No need to go to a branch anymore, and costs have been reduced or eliminated. But the competitive environment for fintechs is much fiercer than it was five or ten years ago,” says analyst Pedro Leduc, from Itaú BBA.