- Key insight: Brazil-based Nubank has launched in the U.S. through a sponsor partnership with Lead Bank as it works to acquire its own U.S. bank charter.
- Expert quote: "The graveyard of U.S. neobank failures is full of companies that hadn't yet proven themselves at home — Nubank has, and it has a cohesive strategy to bridge that success to the U.S." —Javelin's Dylan Lerner
- Forward look: Nubank now has 10 months to fulfill the OCC's conditions for final approval for its own de novo bank charter.
Nubank has now launched its U.S. bank operations, ahead of being granted a de novo bank charter, through a sponsor bank.
The Brazil-based
The partnership brings Nu's digital banking services to the United States, particularly its Latin American population, ahead of receiving a final charter approval from the Office of the Comptroller of the Currency. Launching through a partner bank model allows Nubank to start serving customers and gathering feedback early, according to a company statement.
"This 'bridge partnership' is a pragmatic solution to jumpstart that strategy," Dylan Lerner, digital banking senior analyst at Javelin Strategy and Research, told American Banker. "It enables Nu to establish itself and build a customer base ahead of its bank charter. Why wait when you can start now, especially if you've already paid for naming rights to a stadium?"
A representative for Nu declined to comment on the specifics of the Lead Bank partnership, but said that the company "will prioritize ensuring a seamless experience for customers." Lead Bank did not respond to a request for comment.
Lerner said that the "bridge partnership" model still has some constraints that would make it difficult for Nu to operate effectively in the long term.
"I suspect that they have timed this in accordance with the OCC's openness to fintech expansion," he said. "Nu seems to be aggressively targeting that window of opportunity in administrative policy. This launch may be more of a bet on regulators' timing than Nu's product."
Nubank is also continuing to build its own U.S. bank subsidiary after getting
"We want to earn the place of being people's primary banking relationship, and capturing even a small share of the U.S. market will be transformative for our business," Nubank co-founder and U.S. CEO
The company has not communicated a timeline for opening its own subsidiary as that is dependent upon final approvals from regulators, but the OCC stipulates that a conditionally approved bank should be capitalized within 12 months and ready to open within 18 months to receive final approval for a
Keybanc Capital Markets (KBCM) analysts said in a research note that the U.S. digital banking market will be stiffly competitive for Nubank to enter.
"The U.S. market is represented by equally-to-more sophisticated fintech peers, several of which have meaningful scale in the tens of millions of active users," the note read. "Nu is, of course, among one of the most sophisticated and scaled global fintech platforms, but the momentum/inertia that collectively exists among peers raises a question around the ability for Nu to impact share dynamics from a standing start. It's not an outright roadblock to share gain, but [it is] perhaps a more challenging entry versus existing Latin American markets."
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Nubank also used the event to introduce Nu Global, a multi-currency digital asset account for international customers. All deposits in a Nu Global account are converted into Circle's U.S. dollar-backed stablecoin (USDC) or euro-backed stablecoin (EURC), which Nu advertises as earning daily yields of 3.50% APY and 2.20% APY respectively. Customers can also hold and trade select cryptocurrencies such as Bitcoin and Ether.
"With Nu Global, customers can send and receive money across more than 35 countries with fast transfers free of charge, starting with Europe and Latin America," the company said in a statement. "Integrations with Brazil, Colombia, Mexico and the U.S. are planned for the months ahead."
"Stablecoin infrastructure is core to this conversation and continues to show evidence of lowering barriers for global expansion," KBCM analysts said in the research note. "Network breadth and fiat connectivity of existing providers are still highly relevant, in our view, and provide durability of existing models/partnership opportunities."
Nubank did not immediately respond to a request for comment from American Banker on whether it will offer the advertised yields for Nu Global in the United States.
Lerner said that he has "largely been skeptical" about international entrants into the U.S. neobanking market, especially after European neobanks
"The graveyard of U.S. neobank failures is full of companies that hadn't yet proven themselves at home," he said. "Nubank has, and it has a cohesive strategy to bridge that success to the U.S."
Nubank may also succeed where others have failed, according to Lerner, due to its focused target demographic for potential customers in the U.S.
"Their target is Hispanics, specifically those with cross-border financial ties," he said. "That's a more defined niche than previously failed entrants that were expecting to win on mobile-first, fee-free banking. Plus, Nu is already an established brand with this demographic from its operations in Latin America. The remittance angle is also an effective hook to maintaining that demographic, which could feasibly drive primacy."
