Nubank needs to solve an identity crisis of sorts: Despite its name, it's not a bank at all.
At least not in Brazil, where regulators have taken aim at the nation's largest fintech. New rules approved in November forbid the use of "bank" in a brand unless the company holds a banking license, which Nubank does not.
And so the company is on the hunt for an acquisition, looking for a small bank that already has a license in Brazil, according to a person familiar with the matter. Finding one that also has accumulated losses would offer added tax benefits, the person said, asking not to be identified discussing internal deliberations.
Some candidates have already been evaluated, including Banco Digimais SA, according to the person. No decision has been made, and Nubank could ditch a deal in favor of applying for a license of its own, a lengthy and costly process that an acquisition would let it avoid.
A representative for Nubank declined to comment. Representatives of Digimais, controlled by Bishop Edir Macedo, didn't respond to requests for comment.
The point of the central bank's decision last month was to prevent customers from mistakenly believing the place they're depositing their money is a licensed bank. And Nubank has a lot of customers: 110 million in Brazil alone. With a market cap north of $80 billion, Nubank is more valuable than any of the country's actual banks.
Founded in 2013, Nubank took advantage of an innovation-friendly regulatory framework, which allowed for payments companies to offer credit cards and accounts, the two main levers of Nubank's growth.
By loosening the grips back then, the central bank was trying to foster competition in one of the world's most concentrated banking systems, and all-digital models such as Nubank's flourished. But it also left loopholes that smaller companies exploited, some with connections to organized crime. The central bank moved this year to tighten those regulatory gaps by raising the minimum capital requirements for fintechs.
The new capital rules don't affect bigger fintech companies such as Nubank, but the central bank earlier this year raised the bar on the oversight of the company to match the level applied to some of the country's midsize banks. Chief Executive Officer David Vélez said this week that obtaining a banking license shouldn't be a burden from a regulatory point of view.
