Brazilian fintech Nubank has announced a strategic partnership with Chinese technology giant Tencent as part of a plan to further develop its footprint in the local financial services industry.
The deal involves $90 million in funding and takes the total amount of funding raised to $420 million over seven funding rounds since its launch in 2013. Over the last five years, the company has build a portfolio of 5 million customers for its no-fee credit card, while 2.5 million people have signed up for the company's digital bank account, launched a year ago.
The São Paulo-based company is positioned as one of the top 5 credit card issuers in Brazil and the largest challenger bank in the world outside Asia. Withe the Tencent investment, its valuation is estimated to exceed $4 billion, so well over unicorn level.
According to Nubank's founder David Vélez, the company's accounts have been in the black since last year, so the company was already well-funded. But the whole point of the Tencent deal is to be able to get access to the expertise of the Chinese powerhouse to get its products to become even more pervasive among local consumers.
"Tencent's experience in creating the future of financial services is unparalleled globally. Since our goal is to expand our reach even more and offer a product to every Brazilian, we hope to learn a lot with Tencent's experience in China," Vélez points out.
On competition from global technology players, Vélez recently told me that while Brazil didn't yet have many giants the size of AliPay and even Tencent operating locally, the country's financial services market has its particularities, which could be difficult for an international entrant to navigate.
On the other hand, the recent Tencent-Nubank deal may imply that these foreign companies find it more beneficial to join forces with an already established player with growth potential than risking going solo. The sentiment is echoed by the Chinese company's president, Martin Lau.
"We are very excited to participate in growth opportunities in Brazil and Latin America more broadly through this strategic partnership with Nubank and help the company build an even more complete financial services platform," the Tencent executive says.