A market creation story: Brazil’s Nubank


Aug 20, 2020

“The financial engine for half the world’s jobs is about to seize up,” is how Michael Schlein of Accion, a financial inclusion nonprofit, put it. As the pandemic forces micro, small, and medium-sized enterprises (MSMEs) across the globe to shut down, many will struggle to reopen.

According to the World Bank, MSMEs employ more than 50% of the global workforce, but are often excluded from formal banking sources that are needed to ride out good times and bad. Remaining closed will impact millions of people who rely on these businesses for income. But even before the pandemic, inequitable access to banking affected billions of people around the world. Either unbanked entirely or cut off from the bulk of financial services, they had no financial engine. 

In our language, we call these potential customers nonconsumers. For many organizations, nonconsumers appear unattractive due to their modest means, but for market-creating innovators such as Nubank, nonconsumers signal significant opportunity. 

In the beginning, there was struggle

Nubank’s story, not unlike many market-creating innovators we’ve studied, began when the founders experienced firsthand how difficult and cumbersome it was to access banking services in Brazil. They weren’t poor, and figured if they had such a difficult time engaging with banks, surely other Brazilians must have struggled as well. They were right. 

It turns out that roughly 45 million adults in Brazil lack access to financial services. As the founders dug deeper, they discovered that even among those who were banked, many were dissatisfied with the service they received. From the high fees banks charged to the amount of time it took to complete simple service, it seemed as if the business model of many banks was to frustrate their customers. Brazil’s banking sector is one of the world’s most bureaucratic and expensive, with little to no competition at the top where the biggest five banks dominate. Co-founder David Vélez and his colleagues were convinced there was a vast opportunity to create a new market that made banking simple and affordable. Co-founder Cristina Junquieria explained, “Each problem can be an opportunity to inspire and to be solved through entrepreneurship”.

It’s important to note that market-creating opportunities in countries such as Brazil, with a GDP per capita of more than $7,500, often look different than those in much poorer countries. In poorer countries nonconsumption is obvious—because few products and services have been democratized, the vast majority are literally unable to consume them. In slightly wealthier countries, a greater percentage of the population may have access to services like the bank, but because barriers to actually using those services remain, millions are still nonconsumers of many financial services. 

How Nubank did it

Because existing markets are structured to serve certain customers in a specific way, market-creating innovations, which leverage a completely new business model to target nonconsumers, often seem impossible before innovators create the market. A majority of the feedback the Nubank founders initially received was negative, but they persevered. Intuitively, they focused on leveraging technology and a novel business model to remove the typical barriers to consumption: access, time, money, and skill. 

Access and Time

Before Nubank, in Brazil you almost always had to visit a bank branch whenever you had problems with your account. This meant taking time off work, spending money on transportation, waiting at the bank lines, and hoping you got your issue resolved. Nubank set out to remove these barriers by putting the smartphone at the center. The company enabled customers to create accounts, apply for credit, and resolve a variety of  issues with their smartphones. This saved time and increased access.


In countries where trustworthy credit reporting infrastructure exists, lenders can easily obtain the credit history of borrowers, enabling millions of people to plug into the system. Because Brazil’s credit reporting infrastructure is very bureaucratic, people have to develop the knowhow, or skill, to prove their credit worthiness. They have to know the right people, figure out how to accumulate and collateralize their assets, and assess which interest rate is right for them. Nubank removed this barrier for its customers by developing a novel scoring method based based on data science from customers’ smartphones


Money is the most obvious barrier to consumption. Nubank removed this barrier by electing to not charge bank fees (to date, Nubank customers have collectively saved more than $1.5 billion in fees). In addition, Nubank charges a modest 2.75% to 14% in interest for its credit cards, much lower than the 14% to 26% that traditional banks charge.

Nubank’s impact on prosperity

To date, Brazil is one of the countries worst hit by the pandemic. As Brazilians—and the global community at large—struggle to get through this crisis, it’s essential all people have access to reliable credit and other financial services. To that end, Nubank has already made a tremendous impact. Of its 26 million customers, roughly two million earn less than minimum wage, indicating that the company has succeeded in making banking simple and affordable enough for all.

One of the hallmarks of market-creating innovations is that they create an opening for other entrepreneurs and investors to participate in the new market, leading to bustling economic activity that ultimately translates into job creation, infrastructure, and much-needed tax revenue. Nubank alone has employed more than 2,700 people, and as others join the new market, many more jobs will be created. In addition, in the years since Nubank’s founding, fintech has grown rapidly. There are now around 740 fintech companies, up from barely 200 in 2016.

Nubank’s story is still being written as the bank is barely seven years old, but its founders already have their sights set on the more than 250 million Latin Americans who remain unbanked. David’s vision, in his own words, is to “free the banking industry for Latin Americans.” They are well on their way.

For more on market-creating innovators, see:

A market-creation story: Aravind Eye Care

Efosa Ojomo is a senior research fellow at the Clayton Christensen Institute for Disruptive Innovation, and co-author of The Prosperity Paradox: How Innovation Can Lift Nations Out of Poverty. Efosa researches, writes, and speaks about ways in which innovation can transform organizations and create inclusive prosperity for many in emerging markets.