Nubank has officially ascended to the top table of Brazil’s banking industry. After securing a new investment of USD 400 million in a Series G funding round, the company raised its market value to an eye-popping USD 25 billion. The company claims it now figures among the top five most valuable financial institutions in Latin America, just eight years after opening up for business.
- Experts warn, however, that Nubank must maintain focus on its core values and avoid the pitfalls to which traditional players have succumbed.
What now? Nubank said the new funds will finance the expansion of its Colombian and Mexican operations, where the bank has already launched its trademark purple credit card. It also announced reaching the mark of 34 million “unique” product customers — as the credit card is currently used by 20 million people and 30 million Brazilians have access to its digital account services.
With the new additions, Nubank has become the largest independent bank in the world.
- “We want to accelerate our revolution in Brazil, bring more products and better products to all Brazilians and increase our expansion in Latin America”, said CEO and founder David Vélez.
- BTG Pactual believes the Series G round is another step toward preparing NuBank for a future IPO, as the company is clearly adding new products while improving its ecosystem and client monetization.
- Analysts say Mr. Vélez could soon step down from his role as CEO, as rumors say he is actively engaged in head-hunting for executives.
Auspicious news. As Brazil’s biggest fintech, Nubank often acts as a proxy for movements in the sector as a whole. This time is no different. According to Cassio Reis, head of marketing of cryptocurrency platform WiBX, “large Series G rounds like this, that include the participation of long-term investors, show that there is indeed money available for the ecosystem, particularly for good ideas,” he told The Brazilian Report.
Growing pains. Nubank and other digital banks were born with the mission of providing better customer experience than traditional banks. But as operations grew bigger, complaints followed. Fellow digital bank Inter leads the country in complaints. Nubank, which prides itself on a customer-centered approach, ranks tenth.
- “Preserving company culture and purpose in scale is very hard, but possible,” says Mr. Reis. “If the company sticks to its brand positioning, it can set itself apart without losing its initial values and beliefs.”
Data protection watchdog sets its priorities for 2021-2022
Five months after the General Data Protection Law (LGPD) came into effect, the National Data Protection Authority (ANPD) has finally launched its regulatory agenda for the 2021-2022 period. It will be tasked with filling the gaps left by existing legislation and provide guidance for the private sector to implement changes before they run the risk of sanctions.
First things first. The delay in its creation has the ANPD in hot water, with more tasks on its plate than it can possibly address at once. As a result, six of the regulator’s top ten priorities will require resolutions within the next 12 months. These include bureaucratic tasks such as internal regulations and strategic planning, but also major points for the private sector.
- They include special regulation of the LGPD for small businesses, rules for applying fines, the process of reporting incidents to authorities, and the highly controversial report on data protection impacts.
- With so many immediate tasks, ANPD delayed the process of establishing responsibilities for in-company data protection officers and the rules for international personal data transfers. The rights of personal data owners will not be addressed for another two years.
- According to lawyer Alisson Possa, a specialist in data protection and digital law, the lack of standardized regulations create “doubts regarding what companies of different sizes are expected to do.” In this sense, he sees the agenda as being immensely positive to help give more guidance to the private sector.
Building a house during a flood. Amid the pandemic, Brazil saw cyberattacks and data leaks increase dramatically, including last week’s massive data breach which exposed the personal information of 220 million people.
- The case is a textbook example of Brazil’s glaring holes in data protection, as experts believe that government databases may have been compromised.
Poor start. It took ANPD several days to inform the press it was cooperating with investigations on the case, which was one of the biggest leaks in the country’s history.
Isolation first. Though Brazil urgently needs to regulate international data transfers to other countries, experts say domestic challenges demand attention first. “It’s important that ANPD is solid before debating the adequacy of other countries’ [data laws],” says Nuria López, a lawyer specialized in technology and data protection at Daniel Advogados.
- However, without regulations on international data transfers, each company is responsible for ensuring data protection on a global level. “It will force companies into being much more careful than usual,” said Ms. López.
Data Privacy Counsel. ANPD’s board should have the support of the National Data Privacy Council in formulating regulations, as the agency will be responsible for gathering submissions from civil society in the regulatory process. However, not all of the council’s members have been appointed yet.
Live commerce’s time to rise and shine in Brazil
After the unprecedented rise of e-commerce in 2020, retailers are on the lookout for new opportunities for growth. One such possibility is so-called “live commerce,” wherein companies organize live broadcasts showing off their products, allowing consumers to buy while they watch. The sector believes this mix of entertainment and shopping may find fertile ground in Brazil.
Benchmark. Live commerce is still in its early days in Brazil, but the segment’s potential is significant. In China, live commerce was projected to top CNY 1 trillion in 2020, doubling its size from the previous year.
Local context. There is little data on the size of Brazil’s live commerce market, but preliminary figures show a promising outlook. Per PayPal, e-commerce sites make up nearly 8.5 percent of all websites in Brazil — a share that was 2.5 percent five years ago. Over 39 percent of these e-commerce companies that have a social media presence created a YouTube account, indicating an interest in using video formats to further sales. Moreover, according to Google, 85 million Brazilians watched live broadcasts between January and August of last year.
- The main bottleneck, according to Alessandro Cauduro, CEO at innovation unit Huia, is that traditional social media platforms do not offer sufficient payment options, making it difficult for companies to monetize their live broadcasts. With this in mind, Huia developed a live marketing platform that allows companies to stream on their website with embedded payment features. So far, 10 companies have already adopted the service, they say.
Special occasions. Last year, live commerce was the secret weapon of high-profile retailers Americanas and Magazine Luiza, as they sought to generate buzz ahead of Black Friday. Both organized huge online events with famous musicians and celebrities, introducing the concept of live commerce to Brazil’s consumers.
- However, Mr. Cauduro believes the format will have to be much simpler in order to gain widespread adoption. “Huge investment in such events does not pay for itself from a financial point of view. The format we believe in is much simpler: just switch on the camera and interact with your customers,” he says.
Limits and customer adoption. Mr. Cauduro believes that the main advantage of live commerce is the ability to interact and direct content to target audiences. In this sense, he sees huge potential for YouTubers to become specialists in the segment, “which is not easy, as you need to know how to sell and have a deep expertise in the product.”
- The biggest opportunity, he says, lies in selling products “which people might have questions about, that have a bigger added value, or that allow you to bring lots of content to the live broadcast, such as makeup.”
- 5G. Anatel surprised the market by releasing the procedures of Brazil’s upcoming 5G spectrum auction, which were only expected for the half-way point of the year. The regulator will hold an extraordinary board meeting on February 1 to define the public bidding process for the 700 MHz, 2.3 GHz, 3.5 GHz, and 26 GHz spectrum ranges for the 5G frequency. The decision comes after Brazil’s Foreign Affairs Ministry began using the auction to convince Beijing to release inputs for Covid-19 vaccines in Brazil, in an attempt to smooth over a series of diplomatic blunder.
- Fiber optic. Chile and Argentina announced a project for a new fiber optic cable connecting the two countries to Asia, Australia, and New Zealand, in an attempt to diminish their reliance on the U.S. and Europe. The Puerta Digital Asia Sudamérica project will be carried out by Argentina’s state-owned telecommunications company Arsat.
- Wi-Fi 6E. Anatel finished its public consultation on the use of the 6 GHz spectrum range for Wi-Fi 6E. Throughout the process, mobile carriers sided with the European model, which designates a larger share of the spectrum to mobile use. Meanwhile, fixed telephony and equipment manufacturers preferred Anatel’s idea of directing the spectrum to indoor Wi-Fi, allowing the new form of connection to work in tandem with 5G. The regulator now has 45 days to decide on the issue.
- Cloud computing. Huawei’s next frontier in Brazil will be cloud computing, according to its cloud unit vice-president in the country, José Nilo. The company opened a second data center in the country and aims to challenge the dominance of AWS and Google Cloud in the domestic market. Another business front is the Kubernetes and containers market, currently dominated by Red Hat.
Article published on The Brazilian Report. Read it here.