Friday Briefing: Nubank delves into web3… what does it mean?

Did someone forward you this email? Get your own copy here

October 21, 2022

#TopStory 🔝

Nubank touts cryptocurrency and explores web3. What does it mean?

Nubank this week unveiled its own cryptocurrency and said it plans to explore the potential of web3 and blockchain, joining the growing group of financial institutions seek to reap the benefits of the technology.

Nubank plans to make its Nucoin available in the first half of 2023 to clients in Brazil,  in a bid to compete in the field of virtual assets. It is
following the lead of firms such as Mercado Libre, which in August presented Mercado Coin in Brazil. Latin America’s largest economy is emerging as a bubbling crypto laboratory.

The digital bank will design its crypto asset in partnership with Polygon, a blockchain and web3 development platform, and include the crypto coin in its rewards programs. “This project is another example of our belief in the transformative potential of blockchain technology and further democratizing it, going beyond buying, selling and holding cryptocurrencies in the Nu app,” said the head of Nucoin, Fernando Czapski, in a statement.

Although cryptographic technology has been permeating the fintech and traditional banking product suites, references to web3 — a concept that’s still in development — are less common. The basic idea is to create a virtual economic exchange system based on tokenized assets.

Nubank joins the likes of Starbucks, Robinhood and Stripe, which use Polygon’s platform to develop decentralized services.

“Brazil is one of the largest and most profitable markets at a competitive level,” Juan Frers, a partner overseeing technology at crypto consultancy Beps Global Consultores, tells iupana. “That’s why different exchanges or cryptocurrency exchanges have chosen to compete
there.”

It’s a trend that we will surely be hearing more about.

“It’s essential to understand that the current cryptocurrency market is at a critical moment […] the centers of [crypto] multinationals are mostly in Europe and the United States. But it’s emerging markets, both African and Latin American, that could be the summit of the future,” adds the analyst.

Cybersecurity meets open finance in Brazil

New means of payment such as Pix and technologies that integrate financial data such as open finance, have brought several benefits, but they need to be secure, both for users and for providers, said Diego Pérez, president of the Brazilian Association of Fintechs (ABFintechs). Pérez said fintechs must ensure their investments in product and service development are aligned with spending on cybersecurity and personal data protection.

#Quote of the week 📆

“We should not demonize [crypto] in a generic way but rather stop and focus on the risks and try to minimize them without stifling innovation.”

Álvaro Castro, from Sumara Hub Legal, a Peruvian law firm with a focus on fintech and banking, speaking during episode 2 of the podcast series “The Future of Money: Crypto, Digital Currencies, and Financial Services.”

#Strategic Plays 📊

Ualá moves on the acquiring market in Colombia

Ualá has entered the acquiring vertical in Colombia with its product Ualá Bis, which allows businesses to make physical and online payments that go immediately to the merchant’s account. Pierpaolo Barbieri, the the Argentine unicorn’s founder, laid out the strategy for Ualá Bis when the product was launched in Mexico in May.

Also…

• Raízen, a Brazilian energy company, acquired the digital wallet Payly for US$14 million with the aim of further developing the company’s financial division.
• Risk analysis fintech Mareigua and global data company Equifax have teamed up to enter the Colombian market for financial risk analysis.

#Investments 📈

Covalto de México receives US$200m financing

Covalto, a financial services platform for SMEs in Mexico, has lined up US$200 million in new financing. The firm obtained the equivalent of US$190 million in peso-denominated credit from state-run agribusiness lender FIRA. In addition it received a US$10 million loan from the U.S. International Development Finance Corporation (DFC). The company’s debt was also classified as investment grade by HR Ratings. Covalto recently talked to iupana about its ambitions for expanding throughout the region in 2023 and its plans to list shares in in the U.S.

Also…

• Reworth, a Mexican cashback fintech, raises US$3.3 million to expand its seed capital. Sergio Furio from Creditas, Daniel Vogel from Bitso, and Justin Mateen, the founder of Tinder, were among those that participated in the financing.
• Vector Partners, a Mexican mezzanine
  financing group, invests US$7 million in Macropay, a company that finances the purchase of cell phones. The proceeds will be used to open more branches.

#iupanaExclusive 🔥

Mexican unicorn Clara says it’s close to making a profit as it pursues its strategy of using debt to finance lending to SMEs in Mexico, Brazil and Colombia, while also allocating capital to invest in technology and growing operations. This week, we spoke with Rodrigo Aparicio, Clara’s new CFO, who explained how the fintech’s business model works and how it will facilitate its plan for an initial public offering (IPO).

• Clara plans to announce new lines of financing for lending in Brazil and Colombia.
• Aparicio has been charged with laying the groundwork for an international
  IPO.
• The challenge is to continue to increase user numbers and keep revenue flowing.

Read all about Clara’s plans to go public in our lead article of the week.