Descubre el futuro de las finanzas en América Latina y el Caribe

The future of finance in LatAm & the Caribbean

O futuro das finanças na América Latina e no Caribe



Itaú and C6 strategize to conquer the nomadic dollar

May 22, 2023

By Roberta Prescott

Fintechs such as Wise and Nomad are leading the way in catering to digital nomads while banks feel the pressure from customers demanding cheaper, easier international payments.

In an increasingly globalized world and with more people traveling and working from different locations, is providing financial services to digital nomads an attractive business opportunity?

Banks and fintechs operating in Latin America recognize there’s a growing market for quick, cheap and easy cross-border payments and international card transactions. Companies such as Wise, Nomad, C6 Bank, Revolut and BS2 have spotted an opportunity as their products gain traction, and industry heavyweights such as Itaú Unibanco are also looking to enter the field.

But for the most part, international account solutions are the realm of fintechs, which are moving quickly to plug the gaps left by the larger players.

For example, digital lender C6 Bank offers clients an investment account with a balance in dollars that gives them the option of buying shares and other instruments trading in the U.S. It also has an international account with balances in either dollars or euros and an international card, all in the same app.

Demand from users looking to invest in other currencies has increased tenfold in the past year, Igor Rongel, head of investments at Brazilian C6 Bank, tells iupana.

The strength of demand can be explained by rising U.S. interest rates, which offers attractive returns on balances in dollars, as well as by people seeking to protect their savings abroad.

“There was pent-up demand, either from people who always wanted this solution but didn’t have the financial capacity to do it, or from people who didn’t even know this possibility existed,” says Rongel.

The appeal of catering to Brazilians abroad led Itaú to ink a deal in July 2022 to purchase 50.1% of Avenue Holding, a digital brokerage based in the U.S.

Itaú is expected to take advantage of Avenue’s access to the U.S. financial system in order to offer banking and brokerage services to its clients.

Avenue currently has 492,000 accounts, 229,000 active clients and holds funds totaling R$6.4 billion (US$1.3 billion).

Brazilian superapp Inter also bought a U.S. fintech in 2021, partly as a means to offer an international account to its clients in Brazil.

“Traditional banks see [the demand] but development is a problem for them and we’re moving faster. We see the trend consolidating. Banks will either have to buy and give their client a solution or they will look elsewhere,” says Rongel. The move towards global accounts is irreversible, he adds.


Who are the digital nomads?

In 2022, the majority of traveler-workers came from the U.S., and it is also the country that received the most remote workers, according to Statista. So, it’s clear why demand for accounts that allow dollars to be exchanged for other currencies has increased.

Remote workers are mostly self-employed and are looking for long-term accommodation. The takeoff of teleworking during the pandemic led Latin American countries such as Brazil and Mexico to offer incentives to attract such workers to support local economies. Last year, Brazil approved a visa designed for digital nomads, a group which, according to the government of Mexico City, generated 15% of tourism income in 2021.

Platforms offer their products in Latin America according to local dynamics. Brazil is the main market for U.K.-based Wise and its strongest product is the travel card, says Helene Romanzini, the fintech’s product marketing manager. But each market is different. “In Mexico, we look a lot at how we help Mexicans receive money from abroad in a simple and cheap way,” she says, highlighting the country’s strong remittance market, which last year reached a record of US$58.5 billion.

“In Argentina and Uruguay, what stands out are freelancers who want easy ways to get paid in another currency,” Romanzini adds.

Founded in 2011 as Transferwise, the company’s initial focus was on transferring money between countries. Its portfolio evolved from there to include products such as a multi-currency account (launched in 2017) and a prepaid debit card—a popular solution in the sector aimed at tourists who add the funds they wish to use in their chosen currencies.

“Wise understands that customers also have other needs, such as keeping money in another currency and in a way that is accessible for spending,” Romanzini says. Wise has 16 million customers, of which about 6 million are active, and it moves about £25 billion (US$31 billion) every quarter. The firm adds around 100 thousand new clients every week.

Revolut recently entered Brazil with a similar model and expects to move into Mexico in the future.


Investments in $$$

Wise’s main competitor in Brazil, Nomad started out offering an account in dollars and a debit card from a bank in the United States, and it has since expanded into an investment platform. “This serves two use cases: those who are going to travel and have the benefit of a reduced IOF [Brazil’s tax on financial transactions] with a cheaper exchange rate. And the second use case is to save dollars,” says Caio Fasanella, head of investments at Nomad.

Apart from multi-currency wallets and global accounts, people are also looking for ways to save in a stronger currency than the one at home. But until recently, in order to access to a dollar account, you had to open it in the U.S.

Wise customers in the European Union can use the platform to make fixed income investments and there are plans to expand this option to Brazil, according to Romanzini.

Nomad, for its part, offers an investment account with access to shares and exchange-traded funds, or ETFs, which are baskets of shares traded in the U.S. “We work with the solution to save in dollars, which addresses inflation concerns and protects the portfolio,” Fasanella says.

The original idea behind Nomad stemmed from the type of difficulties that Fasanella himself faced when he worked at Bank of America U.S. and wanted to dollarize part of his savings. For a foreigner, it wasn’t easy and the process had a lot of friction, he says.

“In Nomad, your money is in a bank in the United States. Some competitors have a wallet, others have an account in the Cayman Islands. Throughout 2021, we expanded the investment offer through a brokerage house,” Fasanella says.

Nomad added international payment products following the purchase of Husky, an international transfer startup, in November 2022, targeting customers who want to receive money from abroad. According to Fasanella, the fintech is growing quickly, quadrupling in size every 12 months, and 1 million users have downloaded its app. In January, it registered R$1 billion of exchange transactions and card expenses.

The fintech only serves Brazil at present but plans to expand to other markets although not in the short term. “Latin America seems to be the natural path,” Fasanella adds.

Nomad recently introduced payment by installments for purchases in dollars, “giving customers the opportunity to buy in dollars and pay in reais in installments, allowing them to have more resources available on their trip,” said Nomad CEO Lucas Vargas, in a note. The fees will be charged in reais on the client’s Brazilian credit card.


The future of cross-border payments

BS2, for its part, was born as Banco Bonsucesso in 1992 and is now positioned as a digital bank. The entity focuses on the corporate market —it launched an international corporate account in 2019— and according to the executive director of the foreign exchange area of BS2, Carlos Eduardo de Andrade, streamlines a process that was previously complex, allowing the client to manage operations through the mobile app.

BS2 has a branch in the Cayman Islands and is authorized by the local central bank and its counterpart in Brazil. Clients can send and receive money to any account in the world. In addition, the bank’s portfolio includes a platinum card for individuals and a black card for companies.

“We launched the solution at the end of 2019 and the pandemic came in 2020, but the number of accounts grew despite the pandemic,” Andrade says. One reason is digital nomads, who can receive payments in dollars and convert them to real as needed. BS2 has 215 thousand international accounts.

Currently, the bank is fully focused on financial services to companies. One of the global account solutions is the B2B2C format, with BS2 acting as a white label, signing alliances with other companies that offer the service to their clients. There are six such contracts and 12 in the pipeline, Andrade says, without identifying the companies.

According to the executives interviewed for this article, the global account segment and their related services is poised to keep growing, propelled by the post-pandemic reality of the home office.

Caio Fasanella, from Nomad, says there’s no going back. “The exposure to dollarization is starting now. We’re going to see a lot of competition with the big banks looking and trying to get into this market. As a fintech, we have the advantage of flexibility and agility we’re a few years ahead of other players,” he says. The option of opening a global account will become popular as customers seek diversification. “We’re only at the beginning,” he adds.