Invest Like the Best with Patrick O'Shaughnessy
00:29:26 · David Vélez
[00:29:26] S1: Yes, absolutely. I mean, the first thing you have to do is measure or record a lot of those transactions into a ledger. And that's what the utilization of cash enables. And then with better algorithms, and AI plays a role here. And then also with better products, you can enable people to start building that credit history. So I'll give you an example. We were the first credit card for 30,000,000 people in Latin America. When we used to ask banks why so many banks didn't give access to credit, what we heard is people don't want credit. People don't want a credit card. They are scared about paying taxes. And so they're never going to use the product. But what really matters is when we realized is what they were really lacking was a product that really matched their needs. And so we started for a lot of people with a product that the first line was $20 a 20 credit line. When banks saw the product, they thought it was absurd. But in reality, people really appreciated that the $20 was better than zero. And those $20 became a 100 and the 100 became a thousand over a period of time. And so you enable them to create a credit history through the right product. And then you enable an AI Copilot for that customer that tells them all the different moves and what they need to do in terms of spending and investing and savings to gain points and become more credit worthy. And that's, again, the concept of you providing a coach to somebody to improve their ability to access credit and improve their financial picture. So absolutely, I think that that's going to be a big enabler.
00:30:51 · Patrick O'Shaughnessy
[00:30:51] S0: How siloed are the individual countries in terms of how useful what you learn in one is helpful in another? Like when you went to Mexico from Brazil, how much of the learning from Brazil was portable versus something about Mexico that's just distinctive about that country? And then how do you think about all the countries you've learned in so far and exporting that and those learnings to other geographies?
00:31:10 · David Vélez
[00:31:10] S1: It's more exportable than we would have expected. The part that was less exportable, the biggest difference between at least a country like Brazil, Brazil was actually much more banked than unbanked. And so when we went to Mexico, a lot the conversations that we heard is like, well, but people in Mexico like cash. They don't believe in digital payments or credit cards or debit cards. In the early years of Mexico, that was the biggest difference. When you go from a banked customer or banked country to an unbanked country, it's harder to compete. I always say that we are a shark in digital waters. When we are forced to compete in the offline world with banking branches, we're much less competitive. We don't have banking branches, don't have ATMs. And so for a couple of years, it was harder for us to compete, even though we became the second largest bank in Mexico by now, and the largest digital bank there. But as these countries digitalize also including Mexico, then the world's looking closer to each other. And that's ultimately what you actually see across any other industry. You look at social media across the world is the same product. You look at Netflix, the same product. You look at Spotify, the same product. You look at Uber, the same product. Amazon, generally the same product. So I would say historically there were a lot of particularities and the cash part was a specific one. The future looks much more homogeneous than the past, even for financial services.
00:32:31 · Patrick O'Shaughnessy
[00:32:31] S0: If I forced you to put your investor hat on thinking about FinTech writ large and where there might be other opportunities beyond the ones that you're focused on addressing. If I were to adopt the phrase of our great mutual friend, Mickey Malka, who said a couple years ago, fintech is dead. Maybe he's the best fintech investor ever, and now he's doing less of that and more things in AI and power and data and things like this. How would you frame the global opportunity to invest in fintech businesses of new companies, of startups versus companies like yours that had the scale can go take advantage of a lot of this thing? Like if I think about that battle between if I wanna invest in FinTech, should I do it in the incumbents? You're a new incumbent, let's call you, and to pure startups. Like what do you think the opportunity set looks like?
00:33:13 · David Vélez, Patrick O'Shaughnessy
[00:33:13] S1: I actually asked this question Ricky last week, because I saw him spay a lot of thumb in AI and investing in AI companies. I was like, what are you done with FinTech really? And I liked his answer, which is, no, we're not. We are just doubling down on the larger neo banks or neo FinTechs that are now running the sweet spot between maintaining the ability to transform themselves through AI, but now have access to these modes of scale and data and brand and licenses. And so he continues to be an investor of us. He continues to be an investor of an A lot of startups. And so for the early entrant, I think it's going to be in areas that are potentially less obvious as an entry path. It becomes a little bit harder and you probably are applications on top of AI models that you do. So there'll be specific applications, I think, of an entry path. But I think building a consumer brand with hundreds of millions of customers at this stage, unless you come up with something completely fundamentally different is going to be harder. [00:34:05] S0: Can you talk about this big announcement that you just made and why you're so excited about it, kind of what it means for the business?
00:34:11 · David Vélez
[00:34:11] S1: I think most people still identify NewBank as a Brazil Neo Bank or Latin America Neo Bank, which is what we are. But when you go back in time and look at our seed deck in 2013 and the way we thought about the opportunity, there's nothing specific about Brazil or Latin America around the thesis. The thesis really is that global retail banking will be transformed by digitally native companies. And this is because digital native companies can solve the problems that financial services have better. And these are the problems, the cost, the access, and the intelligence. And so we're excited about this announcement as we launch The US as a market. And we also announced launching to upwards of 35 different countries, a stablecoin backed account. Because this is the beginning of continuing to play in this thesis that is a global thesis in nature. We think about our past thirteen years as proving this model in Latin America and the countries that we operate. And I think we did. We're now the largest private financial institution in the entire continent. We have the highest Net Promoter Score. From a profitability perspective, we have the highest return of equity in a country like Brazil. So we kind of did all the checks and now is a moment to continue executing this multi decade vision of taking this model global. So we're very excited. US is obviously a very competitive market. It is the biggest market in the world. There is a lot of very strong neo banks and FinTechs in The US that will be coming to compete with. But in reality, it's a market that's still dominated by big incumbent banks. So while there is a lot of FinTechs, you look at where is the market, the market is still dominated by a few incumbent banks and some community banks. Most of the banking in The US is still happening through banking branches, as if most of their video and media were happening through blockbusters. They're still need to charge a lot and they need to pay zero yield effectively to be able to fund this physical infrastructure. And there is a lot of comparative advantages that we bring to bear, like our ability to do credit for the mass market, our ability to do payments globally. And there's something that we also announced with the feature. Ability to really make customer love fanatically.