The rapid growth of Brazilian neobank Nubank has shocked the Latin American banking industry. In just over a decade, Nubank has become the largest fintech company in Latin America, with over 100 million customers across the region. As digital banks in the Asia-Pacific (APAC) region aim to replicate this success, there are valuable lessons to be learned from Nubank’s unconventional approach to banking.
Founded in 2013, Nubank has a presence in Mexico, Brazil, and has around 5 million customers. It was also recently granted a lending license in Colombia. Strange It aims to turn a net loss in 2022 into a net profit of $1 billion in 2023, with revenue exceeding $8 billion. Nubank plans to add nearly 20 million customers in 2023, for a total of 94 million, up from 54 million two years ago.
Embracing financial inclusion
One of the key drivers of Nubank’s success is its unwavering commitment to financial inclusion, a key area for digital banks in APAC: Across Latin America, a staggering 70% of the population is unbanked or underbanked, with limited access to credit and basic financial services.
By providing simple and affordable banking solutions through mobile and e-commerce channels. Nubank They are now able to serve customers and demographics that traditional banks were unwilling or unable to serve.
Digital banks in the Asia-Pacific region should take note of Nubank’s approach. 2021 Report According to the Asian Development Bank, an estimated 1.1 billion adults in the region do not have a bank account, most of them in developing countries such as India, China and Indonesia.
This suggests a huge untapped market for digital banks willing to prioritize financial inclusion. By focusing on developing innovative solutions to serve the unbanked, such as mobile-first banking apps, low-cost accounts, and microfinance products, digital banks can not only drive social impact but also unlock significant growth opportunities.
For example, in the Philippines, Union Digital BankThe subsidiary of Union Bank of the Philippines has partnered with digital health and wellness platform mWell to strengthen financial inclusion. UnionDigital banking services integrated into mWell appIt provides users with a holistic health and financial wellness experience.
The partnership aims to make healthcare more affordable by offering digital banking products such as medical emergency loans and flexible payment terms.
Leveraging data and technology
Nubank is essentially a technology company operating in the banking sector. Its competitive advantage lies in its ability to leverage data, proprietary machine learning algorithms, and agile cloud infrastructure to make better credit and underwriting decisions than traditional banks.
Investing in strong data management and analytics capabilities, like the one Nubank has made, is crucial for digital banks in Asia Pacific. By harnessing the power of alternative data sources such as mobile phone usage, social media activity and e-commerce transactions, these banks can understand their customers better, develop tailored products and services and make more informed lending decisions.
be 2022 Report by IDCThe Asia-Pacific big data and analytics market is expected to grow at a CAGR of 19.6% from 2022, reaching US$42.2 billion in 2023. Digital banks that can effectively leverage this data explosion will be well positioned to gain a competitive advantage in the market.
Banking will be the second largest sector in big data and analytics spending in Asia Pacific by 2023.
Partnering with leading technology providers, like Nubank has done with AWS, NetApp, and RealCloud, can accelerate this effort. By adopting cloud-native technologies and implementing comprehensive data management solutions, digital banks can improve operational efficiency, reduce costs, and scale rapidly to meet growing customer demand.
In China, Alibaba Group MYBank is an online-only bank It leverages real-time payment data and risk management system analytics to serve small and medium-sized businesses and unbanked rural and urban customers by analysing over 3,000 variables at the time of loan issuance.
Building a trust “on-ramp”
One of Nubank’s most impactful initiatives is its credit “on-ramp” program, which helps customers with little or no credit history build their creditworthiness over time. By extending small loans and gradually increasing credit limits as customers demonstrate their ability to repay, Nubank is able to serve demographics often overlooked by traditional credit reporting agencies.
As a result, Nubank’s customer acquisition base has seen impressive results and has grown significantly every year.
Digital banks in the Asia-Pacific region should consider implementing similar programs to help the unbanked and underbanked build credit and access financial services. World Bank 2021 reportIn low- and middle-income countries in East Asia and the Pacific, just 18% of adults had borrowed money from a formal financial institution or used a credit card in the past year.
By starting small and leveraging alternative data sources to assess creditworthiness, digital banks can not only drive financial inclusion but also build long-term customer relationships.
XW Bank is China’s third licensed digital-only bank and is backed by New Hope Group and a Chinese smartphone maker. Xiaomi Technology Co., Ltd.has a lending system that automatically grants loans based on an analysis of credit history, accelerating access to credit for creditworthy individuals and small business customers.
Optimize costs and efficiency
Nubank’s success has been underpinned by a relentless focus on cost optimization and operational efficiency. By leveraging cloud-based infrastructure and partnering with NetApp and RealCloud to implement a comprehensive cloud data management solution, Nubank has been able to expand rapidly while maintaining efficient operations.
for Digital Banks in Asia Pacific Adopting a similar approach to cost optimization and efficiency is essential for the region to remain competitive in an increasingly competitive market. McKinsey 2022 reportThe cost-to-income ratio for Asia Pacific banks is expected to rise to 44% by 2025 from 40% in 2020 due to increasing competition and the need for digital transformation.
To counter this trend, digital banks must leverage cloud-native technologies, automation, and data-driven decision-making to reduce operational costs, become more agile, and deliver superior customer experiences at scale.
In Hong Kong, WeLab Bank stands out as a digital-only bank that operates on multiple clouds simultaneously, improving its operational resilience and disaster recovery capabilities. This multi-cloud strategy enables WeLab Bank to increase agility, accelerate time to market, and reduce operational costs.
In addition, the bank Focus on data-driven decision making It enables you to deliver personalized customer experiences and make more informed strategic decisions.
Embrace agile innovation
Another key element of Nubank’s success is its ability to embrace agile innovation and continually adapt to changing customer needs and market conditions. Fostering a culture of experimentation, rapid prototyping, and continuous improvement has helped Nubank stay ahead of the curve and competitive.
Digital Banks in Asia Pacific Banks should take a similar approach to innovation as Nubank: According to a 2022 Accenture report, 60% of consumers in Asia Pacific are more likely to use digital banking services than they were before the pandemic.
To meet this growing demand, digital banks need to be able to rapidly develop and release new products and services, iteratively improve based on customer feedback, and continually refine their offerings.
One way to achieve this is by adopting agile development methodologies and leveraging low-code/no-code platforms to accelerate application development. By enabling cross-functional teams to work collaboratively and iteratively, digital banks can reduce time to market, improve customer satisfaction, and stay ahead of the competition.
Digital-only trust bank in Singapore Using agile technology, including Thought Machine’s Vault Core banking platform, the bank was able to rapidly scale to meet the surge in users, gaining over 100,000 users within 10 days of going live. In just two months, the number of users skyrocketed to 300,000.
Nubank’s rapid growth in Latin America offers valuable lessons for digital banks in Asia Pacific: by embracing financial inclusion, leveraging data and technology, building credit “on-ramps,” optimizing costs and efficiency, and embracing agile innovation, these banks can be well-positioned to succeed in a rapidly evolving market.
As the world continues to move towards digital banking, the opportunities for growth and impact in the Asia Pacific region are enormous. 2022 Report According to the Boston Consulting Group, digital banking revenue in Asia Pacific is expected to grow at a compound annual growth rate of 13% between 2021 and 2025, reaching US$1.8 trillion by 2025.
Digital banks that can effectively learn from Nubank’s unconventional approach and adapt to the unique challenges and opportunities of the APAC market will be well positioned to drive innovation, financial inclusion and economic growth in the coming years.
