Banks, Brazil's GDP, and Spin by Oxxo
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What are Latin America’s biggest banks?
Brazil’s GDP falls below LatAm and the world’s average
Spin by Oxxo vs. Nubank
Make sure you check out the comment of the week at the bottom!
Brazil's big five banks hold a combined $1.5 trillion in assets. With inefficiencies of physical branches and outdated procedures, these institutions have been ripe for disruption for years. Venture capital has been flowing into the Fintech startups that promise to exploit these inefficiencies and capture an enormous market.
Last year was eventful for Fintech startups in Brazil — $3.7B of funding was raised. Latin America's darling, Nubank, went public and reached a valuation high of $54B, which was at the time higher than all of the banks on our chart. Through exploding growth, it now officially has more customers than some of the biggest banks (more on this on our 3rd chart).
Although the promise of Fintech has tremendous potential, it's essential to consider what it's competing with: massive resources and size. Itaú, the largest bank in Latin America by assets, has 17x the revenues of Nu and 15x the assets. BBVA invested $600M into Neon, another Brazilian Fintech, in a move to expand its retail banking operations. The move demonstrates the ability of these giant banks to deploy capital to adapt and compete.
Still, the Fintech sector is pressing on, with startups that promise to disrupt nearly every one of the big banks' operations.
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Two self-aggrandizing men getting into a war of words isn’t typically a news-worthy occurrence, except when the men in question are Brazilian political heavyweights Jair Bolsonaro and Luiz Inácio Lula da Silva. The two traded insults in the first televised presidential debate on Sunday, ahead of Brazil’s presidential election on 2 October.
Former President Lula served 580 days in prison between 2018 and 2019 for several offenses uncovered in the continent-spanning Petrobras corruption scandal. But, the Brazilian Supreme Court annulled his corruption convictions last year, allowing him to run again. Lula has held a comfortable lead in the polls for the past few months. Still, it looks like his lead is narrowing, with online polling showing Lula with a 5 to 8-point advantage over Bolsanaro - a significant decrease from the ~17-point difference in February.
Those numbers will encourage Bolsonaro, who hopes that a slowly improving economy will help him close the remaining gap. Brazil is an ‘upper-middle-income country,’ but its economy has suffered significantly over the past decade: A downturn in commodity prices and dampened domestic demand severely affected the country’s GDP per capita, which declined 43% from $13,245 in 2011 to $7,518 in 2021.
As a result, the economy is a crucial topic for Brazilian electors, and right now, it is helping President Bolsonaro make his case for reelection. Unemployment is at a seven-year low, interest rate hikes have helped cool inflation, and consumer demand is recovering thanks to a multi-billion dollar social welfare program. But, most political analysts still aren’t predicting a Bolsonaro win — Inflation remains above 10%, the president’s mishandling of the Covid-19 pandemic has not been forgotten, and many Brazilians remember a prosperous economy during Lula’s years in power.
In the LatAm Fintech race, Nu is the current winner. Its rate of growth has been nothing short of amazing: In less than ten years after its founding, the company has surpassed some of the biggest banks in the world in terms of the number of customers, including HSBC and BNP Paribas (founded in 1850 and 1822, respectively), becoming the largest of the so-called neobanks in the world. Now, none other than Mexico's Oxxo is on track to break some of Nu's records.
Oxxo, the Mexican convenience store with a bigger presence than some of the world's most prominent chains, is now one of LatAm's fastest-growing Fintech companies. By leveraging its more than 20K locations and its well-recognized and trusted brand, the company is adding users to its Spin debit card at an unprecedented rate. In just 3 quarters, Spin has surpassed 3M users, with over 61% at least once every 2 months. For perspective, it took Nu 15 quarters to reach the same number of users.
Mexicans had relied on Oxxo for transactions like deposits and e-commerce purchase payments for some time already. In December, FEMSA, Oxxo's parent company, got more serious about becoming a bank and spun off its Fintech division — FEMSA Digital. Femsa Digital's offering goes beyond Spin; it includes OXXO Premia, a rewards Program (itself now has 15M users) that allows customers to collect points and redeem them for free products and discounts.
Whereas Nubank had to work diligently to build a brand and earn customer trust, Spin by Oxxo was born with both. Advertising is being blasted (at minimal cost to the company) to the 13M people that shop at Oxxos daily. Spin holds a key advantage over the fintech startups that have competed to penetrate Mexico's substantial unbanked population — retail space. Physical shops might be the right approach to acquire customers into the digital banking space successfully. Mexican supermarket chain Chedraui pioneered that approach with its own fintech, Bankaya.
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This week’s opportunity:
Nubank has so many open roles
3 in Argentina 🇦🇷
27 in Brazil 🇧🇷
15 in Colombia 🇨🇴
1 in Germany 🇩🇪
11 in Mexico 🇲🇽
1 in USA 🇺🇸
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That’s all for this week 👋
Comment of the week in response to our Juan Valdez chart on LinkedIn. Perhaps we shouldn’t have called them the ‘Starbucks’ of Colombia?
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