David Vélez has built an $8 billion fortune turning nearly half of Brazil’s adults into customers. Why can’t American fintechs do the same?
David Vélez has built an $8 billion fortune turning nearly half of Brazil’s adults into users of his credit card, digital banking and loan products. Why can’t American fintechs do the same?avid Vélez has delivered a string of surprises since leaving his nascent venture capital career in 2013. The most recent came on May 15, when his company Nubank blew away analysts’ expectations by posting $142 million in net profits for the first quarter and $1.
Such strategic and marketing insights have helped make Nubank the second most valuable financial services company in Latin America, behind only 78-year-old Itaú. True, with its stock trading around $8, Nubank is still down 12% from its initial offering price of $9 in December 2021. But that’s impressive compared with a 54% drop for the fintech category in the same time period.
“Venture capital and credit are a marriage made in hell,” Morris quips. “Venture capital is by its very nature impatient. It wants to see results and wants to see accelerated growth … whereas lending requires you to be incredibly meticulous, logical, linear and exhaustive.” Learning to lend profitably requires giving money to people who won’t pay you back, then figuring out who they are so you don’t give them money again. “Training that mathematical model doesn't take weeks.
In the U.S., fintech startup Varo tried to pursue this strategy, spending three years and nearly $100 million to get its own bank charter. But it hasn’t worked out, likely because steep competition and rising costs to acquire customers have hampered growth. As of the end of March 2023, Varo reported 5.2 million total accounts, down from 5.3 million in December 2022.hile Nubank’s growth so far has been stunning, keeping up that pace will be tough.
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