Like the neobank boom has turned into a collection of large digital banks, we are slowly getting a better picture of the economy from these business efforts. Carillon was early by telling the market that it was positive for EBTIDA, for example, unlike the less profitable European neobanks.
Nubank’s upcoming IPO – technically Nu’s public offering, but we’ll just say Nubank for the sake of simplicity – gives us a lot more information and detail regarding the operations of a large-scale neobank, thanks to its new public repository.
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Good news for its peers who might be looking to go public, the numbers Nubank shared seem to make some pretty reasonable business sense.
We will have more notes in time regarding the company’s offer, its shareholders, its different business sectors, etc. This morning we focus on the general economics of the neobank and will end with a review of the overall financial health of Nubank. We’ll just take a second at the end to test some evaluation scores against what we find.
Building a large-scale neobank is not cheap. Leading startups and unicorns in the market niche have been raising tectonic capital to get to where they are today. But what did all this money buy for them? In the case of Nubank, a lot, it seems.
The economics of the neobank
Nubank is an of the most valued startups in the world, with more than 40 million users in Brazil, as well as in Mexico and Colombia.
Neobanks, like any consumer product, can be viewed in terms of customer acquisition costs, customer monetization and activity, and long-term revenue. We want to know what Nubank pays to attract new users, how their product usage and rates translate into revenue, and how much the fintech giant can leverage users over a longer time horizon.
Customer acquisition costs
Nubank prides itself on its customer acquisition costs (CAC). The company says in its F-1 record that its CAC was “US $ 5.0 per customer, of which paid marketing was around 20%” for the first three quarters of 2021. That’s lower than we expected. , frankly.