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Speaker 2If you look at it. If you look at global consumer financial services, it's about a $10 trillion industry, and still something like 90% of that industry goes through banking branches, and it's owned by incumbent banks. So while there is a lot of new banks and fintechs across the world in a number of different areas, we are. All of those fintechs and all these new banks together, we're less than 10% of that entire market. Still in financial services, it's still almost as if 90% of the world was going to blockbuster to get VHS and DVDs. And Netflix-like services still had something like 10% of that industry. So that transformation, that migration that you've seen in our industries, in media, with Netflix, in retail, with Amazon, with the Barnes & Nobles, in transportation, with companies like Uber, that migration from incumbents to digitally native companies is still very, very early in financial services. I think NewBank is very unique, specifically in Brazil and Latin America, because we are really the only new bank in the world where we fully. But it's very unique to NewBank in Brazil, and increasingly we're doing that also in Mexico and Colombia. We think that this is a little bit of seeing the future of what will happen around the world over the next 10 to 20 years, where you would expect a lot of shift from market share, from the still incumbent banks to the digitally native companies. And that is just migration of market share, but also you'll see a significant increase in market size as billions of people across the world enter the banking system. You still have 3 billion people. You still have 3 billion people that are completely outside the banking system and don't have access to credit.
Speaker 1I'd love to break this into two components. You could imagine if you froze the product today and just worked on getting it in more people's hands, that could be one dimension of expansion. But then, of course, I'm sure you're thinking carefully about all the wonderful things that AI will allow you to do and technology will allow you to do for customers that you don't yet do today. Can you talk through each of those levers to achieve this blockbuster to Netflix transition?
Speaker 2The first phase of transformation that enabled. The first phase of the migration in our industries was the smartphone. And this is the same thesis you see repeating through the smartphone is the moment that we get to serve consumers without all that physical infrastructure, we have such a gigantic cost structure advantage that we can pass that efficiency to the end customer via lower fees and better product. Just to give you a data point, we have 140 million customers with 10,000 employees. Our competitors have 100 million customers with 100,000 employees and 6,000 brands. And you start thinking about why the cost of real estate of the branches is gigantic. So our cost to serve a customer is about 3% of what a traditional incumbent bank is. That means we have so much margin to give back to the customer via no fees, better experience, better interest rates, and overall a better product. That's pre-AI. We're still here in phase one of what a smartphone enabled. AI will be an additional multiplication on that efficiency to that. Because then you get to choose. Whether you want to have much more efficiency and you could automatize a lot of areas of the bank. You could imagine banks that have 500, a billion customers with 5,000 employees just within sight. Or you can just decide to increase your level of ambition. And for somebody like us, especially when we look at how early it is in the transformation for us is why don't we go to 100 countries and try to accelerate this transformation by Nubank being one of the leading digital financial services firm in the world.
Speaker 1What are the craziest things that you can imagine? You can imagine the product or a bank like yours doing for the customer in three or five years because technology has made things possible that weren't before. Just like mobile made a lot of new things possible. We've got a much bigger wave now. Like if you really dreamed about what could be possible, what are some of those ideas?
Speaker 2We like to categorize the problems that we see in financial services in three buckets. One is access. Second is cost. And the third is intelligence. On the access side, again, you still have 3 billion people in the world that don't have access. It's crazy. Almost half of the world does not have access to credit. Even countries like Mexico or Colombia, 13% credit card penetration. Why hasn't that happened yet? Because you needed the creation of a lot of data. You needed sophistication and credit underwriting. You needed the digitalization of the systems to happen. And this is happening. Cash goes away, disappears, enter a number of real-time payment systems, as you've seen in Brazil with PIX or India with UPI. So there is a lot of transformation and kind of transformation. And the real-time payment systems are the ones that are accelerating the rails on which you increase access to consumer banking for the world. And this is going to be a massive opportunity. 10, 20 years from now, 100% of the population has access to banking services. 100% of the population have access to credit. 100% of small businesses have access to credit. This is an insane push to global GDP. I mean, I don't think it's really understood how big of a model this could be for every single economy, as you get half of your entire population in some areas, access to banking. And I think it's really interesting to see how big of a push this is. You have access to nothing. Historically, there's been a lot of conversation about education is the answer. You just got to educate people. People don't have financial education. That never worked. People don't sit down to do classes. You're not going to solve this problem of intelligence through education. You can solve it through AI. And that's where I think AI is really transformational in financial services, because it's almost providing every single person around the world super intelligence to be able to optimize their financial life on their behalf and remove a lot of these profit pools that exist today in banking that in an environment with intelligence will be competed away.
Speaker 1But flesh that last piece out a little bit more. Wealthfront used to have this idea of self-driving money, which comes to mind like, OK, I've got some money. Either I don't have it in the banking system, which is the worst. So I come into the banking system. I'm earning 40 basis points instead of 4%. So I'm in a lousy starting position, but I certainly don't have investments or tax loss harvesting or all this other fancy stuff. What do you think that ends up being? For the average person in a couple of years because of this intelligence bucket?
Speaker 2The first obvious rearrangement is those 600 billion that banks are keeping in their balance sheet to pay for banking branches, get rearranged, get forwarded to all the banking consumers, because suddenly they realize, what am I doing with my money, leaving it at zero? Especially when you think about compounding, what that means for savings and compounding interest. This is a lot of money being sent ultimately to pay banking branches. You look at really anything. You look at any country around the world, any structure. You look at Mexican banking balance sheets, for example, or Brazilians. We're just exactly the same thing. The big incoming banks, about 70% of their deposits, they pay zero and 30% they pay some yield generally to the highest income population or the corporates. One of the things that you see in banking is in a perfectly competitive environment, the best product should win. If you're charging no fees and you have the best experience, banking is a commodity product ultimately. So you should be able to get a hundred percent of the market share. That doesn't happen because there is a lot of inertia. And the system, and with the combination, the multiplication of intelligence with open banking, for example, PLED, PLED can connect 120 million accounts and you put intelligence on top of that. You're effectively allowing each customer to know how to optimize their financial life and what are the fees coming. So I'll give you an example. We're doing this in Brazil today where about 15 million of our customers every day, we're telling them, Hey, your bank account, your credit card in that our bank is due tomorrow. You don't have any money there. And they're going to charge you a 15% interest rate per day. Let us give you some money so you can pay that credit card or refinance. You have this loan at 10% interest. Let us refinance that at 5% interest. It's ultimately a drive towards optimizing and removing a lot of those profit pools on behalf of the consumer. In some products like small businesses do want to sit down with a banker, with a human and have that conversation. If you have millions of dollars to invest, you still probably want to see a human. You don't want to sit on the other side of the table and have that conversation for certain consumer segments and for certain products. If you want to get a mortgage or certain sophisticated products, there is value in having a physical space, but that might be 5% of the cases today versus if you have a savings account, a credit card or a loan, you just don't need that anymore. So I think the rationale would be effectively, yeah, we're trying to serve these customers, but it's ignoring that for the majority of people, especially the mass market, increasingly, you just don't need it. And you don't go to that physical infrastructure anymore.
Speaker 1Yeah. One of the questions that I think lots of investors and founders are wrestling with is what will be the best competitive advantages or moats in this new AI era when the cost to build new stuff digitally is much, much lower. If you had to imagine it like you're some new founder, I strip everything away from you. And your only goal is to kill new bank is to like build a new company to attack new bank, let's say in Brazil or in Latin America. What do you think you would do? Like what would be the vector of attack on your own business?
Speaker 2Which in a way was what we did to the incumbent banks years ago, right? Yeah. Yeah. We were the disruptor going after incumbent banks. So I think the early stage startup today that is AI native, their biggest advantage will be the speed, the ability to move extremely quickly and launch a number of different products, especially if you're born unregulated, then you're going to be able to move fast. By now we are fully regulated. We have banking licenses in a number of different countries. And so we have to go at a certain pace. We have to be checking with regulators. Now, I think specifically in financial services, specifically banking, that will only get you. To a certain point, because eventually you're going to need to be regulated as well. And so I think in summary, there's a lot of conversation about how AI disrupts software and that you can ask ChatGPT or Codex to rebuild an entire software strategy, but you still cannot really get ChatGPT to get you a banking license. And you still cannot really get them to have regulators give you a license in six months instead of two or three years. Specifically on credit or in certain products that we operate in, the amount of data that we have is pretty significant, right? So we have about 140. We have about 140 million customers. For each customer, we have something like 20 to 30,000 data points across 13 different years. So this is a huge, massive amount of information that allowed us to build our own foundation model. We build our own foundation model for financial services, for credit. And this gives us a significant advantage in making credit decisions, for example, or collection decisions. The early stage startup entrepreneur world, they would have the speed. They would have a much harder time getting to that level of data. So data becomes a significant mode now for more the incumbent. Companies like us, we're sort of in the sweet spot of benefiting the most from AI because in one way, we already have the scale and the data and the brand and the trust and the licenses that will be hard for the early native startup to move. But also, we still have the technology angle and technology infrastructure to allow us to benefit from AI and what AI is creating and move even faster than we were moving before.
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Speaker 2We started using machine learning since we started the organization. Since 2013, and we looked at Brazilian interest rates for consumers paying 500 and 600 percent a year, we said, there is an opportunity here to use better data and analytics and machine learning to price credit risk. And different than a lot of fintechs, we decided to take balance sheets, to take credit risk and to be capital intensive by default. And so we had already an organization that was very optimized for making decisions based on models and data. When the chat GPT moment came about three, four years ago, we started paying significant attention around how technology was going to facilitate some of the decisions. And we acquired a company called Hyperplane. Hyperplane in Palo Alto that was already working on doing foundation models for financial services. They were having such a hard time selling to the big incumbent banks. Sales cycles were two years. They were not really able to move while the technology itself was fairly forward looking. So we bought that company. We integrated the team. We think we were the first financial services firm in the world to build their own foundation model with its own proprietary data to do credit decisions specifically. We even published all of our own research. In this area, we developed. An early advantage. We're not using our foundation model for fraud decisions, for Mexico, for Colombia. As we launched the U.S. and our international markets, we can day one already come in with our own foundation model and understand how to use that data for making basic decisions. This should accelerate our ability to come in.
Speaker 1The data thing is such a good example of the scale advantage. And you're an investor, obviously, before starting NewBank. And so I'm sure you've thought about this endlessly. It sounds like scale is maybe the most important thing. That will make NewBank so competitively advantaged for the next 10 years or something. Is that right? Like, does that feel like the right one to pick?
Speaker 2I think it's case important, but you need it also with the right culture and the right systems. So one of the things we heard a lot in the early days was, well, how are you going to compete with the banks? The banks have scale. They have a hundred year history with a hundred million customers. How can you replicate that data? And going back to the analogy of Blockbuster, my answer was always, well, Blockbuster had a huge amount of data, right? Imagine the amount of people coming in into the Blockbuster and seeing if they were looking at that VHS or that DVD or not. Did the data help them build a better search algorithm? No, because they were not capturing the data. They did not have the right systems to capture data. They didn't have the right culture, data culture, to be making decisions based on data or based on models. And somebody like Netflix was able to come in with no data and build a better algorithm and ultimately use that. Scale and data is important, but equally important is your systems and your culture. You ultimately be in a culture that is using a lot of this data to make the right decisions. And this, I think, what differentiates neobanks or more digitally native organizations like us versus the more traditional incumbent banks that are still operating with 15 different systems as a result of a huge amount of acquisitions that they did over the years. And they're still, if you look at a lot of the AI applications, how we use AI to transform COBOL, how do we get away from the mainframe? You're talking about 10, 15-year histories of going to the cloud. They're still in that process of going and putting systems on the cloud.
Speaker 1How do you run that tactically in the culture to make sure you don't. You don't fall in the same trap that like all the big players before you have fallen into, which is that you're suboptimally using your advantages and you don't have a good algorithm. Like, what is the tactics of you making sure the team doesn't mess that up and actually does the opposite?
Speaker 2I think the biggest difference is that historically, traditional banks saw their basis of competition as a lot of banking branches. That's literally how consumers used to pick a bank, is I'm going to pick a bank that has a banking branch very close. And so that's why there was a huge amount of effort and energy into real estate and physical infrastructure. And obviously a lot of focus on building brands and building trust with consumers. In financial services especially, you need to protect that trust with consumer. That's very critical. So when we began the company, we did not have to spend energy or focus on an offline world. It's more of an online world. And we saw technology and data as a way to build comparative advantage. And so since the beginning, we saw ourselves as a technology company, not a bank. Technology company that happens to be in financial services. And therefore the culture itself has a culture that uses data and analytics consistently for every single decision. And what our own foundation model has enabled us is the cost of putting a feature into a model has gone down significantly. Pre-AI, you had to spend six months adding a new feature. If you wanted to test a new feature in a model, you had to be spending several weeks work testing this feature, putting in the model, testing it around. With our own foundation model, you can test a number of different approaches much faster. And then the cost of creating a model, you have an email that has purple letters or yellow letters. The cost of doing a specific experiment has gone down significantly. And so every decision in the organization can now be automatized and be done by model versus a human. That's what AI is also enabling. So it kind of let us do what we were already doing at a much more significant scale, but the culture itself already existed since we saw this as a way to differentiate ourselves since the very beginning.
Speaker 1How do you think the global financial industry, the global financial system will change the most or needs to change the most in the next five years, totally away from your business? Like what are the exogenous changes that you're most carefully watching that you
Speaker 2think matter? One of the most transformational technologies in the world in financial service is going to be the first one is the end of cash. And this is happening really everywhere. There is a lot of big cash heavy economies like Mexico, for example, or Indonesia, or a lot of African countries, Brazil used to be like that, where that cash will go away and we'll digitalize mostly through real time payment systems. I think the implications of this, some of them are obvious. You don't need ranking branches or you need less. So there are less obvious, which is what happens to the economy. For example, the efficiency of banks when they don't need banking branches, the speed at which money moves in the economy, the amount of data that gets created in an economy that then can be used, for example, to provide access to credit. So that's a big catalyst. The second one is open finance and open banking across the world. This is the first one. This is basically the concept that you, as a consumer own all the data that you have across all institutions, and you're able to grab that data and share it with anybody else. So one of the biggest sources of inertia in financial services, but also let's call it telecom, for example, or utilities is that you have a history with a specific company and you cannot transfer that history with somebody else that comes new and incumbents have benefited a lot from that inertia of data. The moment that you can connect, all your history from all your services and pass it to somebody else, you're reducing that inertia and you're enabling more competition for your data. And you can monetize that data as a consumer. You can grab your historical information with a bank and offer it to somebody else that is willing to pay for that. If you decide to do so right now, social media does that without you deciding to do that increasing, you're going to be able to do that as a decision. And the reason why open banking is important is because then it will decrease that inertia globally and will increase significant competition in banking. Banking, today globally really is still very much an oligopoly structure. You have five, six banks in the U S that own 60, 70% of all the assets, same in Europe, same in Asia, same in Latin America. So that will mean a less concentrated banking industry, much more fragmented, much more competition. Obviously that translates into less fees and less cost. Big trend that has a couple of decades is the role of crypto and stable coins around the world. What will eventually happen with increasingly people that are much more mobile in nature is that you operate, in a combination of the Fiat system in your country with a global offshore system. Your lives go in between without you even realizing this for a lot of countries around the world is really important. You've seen with the usage of access to Bitcoin, for example, stable coins increasingly, they want to bank in the offshore system. They don't trust their banking system. They don't trust their Fiat currency today. There's about 190 currencies around the world. My view is that 10, 20 years from now, those 190 will be, maybe 10 because the fiscal situation in so many countries around the world is so dire that a lot of that Fiat money is not real money. This is basically crypto tokens. So increasingly billions of people are going to be banking on the offshore world, US stable coin, but also Bitcoin and other type of assets. You see these two parallel systems interrelating with each other across the world.
Speaker 1If you had to think about the US dollar and its importance, if it goes from 190 to 10 or something, do you think the US dollar is the, reserve currency 10 years from now? Is it one of a few? What do you think its role will be in the world?
Speaker 2There are two sides of that argument. You can make the case. US stable coins ultimately will be the big savior or one of the biggest saviors of the US dollar because it democratizes access to the US dollar. In a while, the fiscal situation in the US is not great and it's deteriorating fast. It's still better than the fiscal situation for dealer hundred and plus countries around the world. You look at the balance sheets of all of the central banks, banks or countries in emerging markets in Latin America, it's way scarier and you don't have the sovereign capabilities. At least there is a lot of demand for the US stable coin. There's very little for the Brazilian stable coin, unfortunately. So the fact that stable coin exists for US dollar will ultimately mean that the US dollar maintains its power as a reserve currency for a very long time, but it won't be unique. I think you'll have other five, six fiat currencies that people will be saving in and a few crypto tokens where you also be diversified. And I've always been a Bitcoin fan and it plays a role in a diversified investment portfolio.
Speaker 1What's the most surprising thing do you think about the move away from cash? What would I not appreciate about the implications of that or how long it would take? Like what's surprising about going cashless?
Speaker 2The main one is what this means for credit markets for the majority of the world and the majority of the world economies still economies are very much offline. And just think about this situation where you have a taco stand in a corner in Mexico City and you're selling through cash. That transaction is not being recorded anywhere. That's a transaction that you're selling to somebody and it goes away and that taco stand cannot get credit today. Now that person has a history where every day they go and sell tacos and they get cash flow that's being recorded, but nobody can underwrite on top of that. The moment that that transaction goes into a digital ledger, that transaction happens digitally. Then suddenly that taco seller can take that information to a bank and says, Hey, look at my cash flow. Give me access to credit. And if you give me access to credit, I can now have two taco stands or I can have five taco stands. Digitalization of the economy and what that enables for credit for a significant percentage of the world population is something that is not very well understood today and is a huge accelerant. And again, you look at economies like Brazil, for example, something like 70% of all the employment in the country is still in small businesses. It's not the big corporate small businesses. The same thing happens in India, for example, or Southeast Asia. Small businesses historically also dealt with cash. Now they're digitalizing. So this is trillions of dollars of credit being enabled for billions of people around the world. This could be a significant economic shift for economic mobility across the world. In his eyes, a very exciting opportunity.
Speaker 1Do you think that you can create credit worthiness versus just predict or measure it once you have all this data? Like, is that one of the goals to like help people become more credit worthy somehow?
Speaker 2Yes, absolutely. I mean, the first thing you have to do is kind of 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. We were the first credit card for 30 million 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 credit. 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 realize 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, that $20 was better than zero. And those $20 became $100 and the $100 became $1,000 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 co-pilot 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 creditworthy. 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's going to be a big enabler.
Speaker 1How 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?
Speaker 2It'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 of the conversation that we heard is like, well, but people in Mexico like cash. And I 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. We 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. But as these countries digitalize also, including Mexico, then the world starts looking closer to each other. And that's ultimately what you actually see across any other industry, right? You look at social media across the world, it's 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.
Speaker 1If 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 of 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 the eye 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 want to 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?
Speaker 2I actually asked this question to Mickey last week because I saw him spend a lot of time in AI and investing in AI companies. I was like, what are you done with fintech really? And I like this answer, which is no, we're not. We are just doubling down on the larger neo. Banks or neo fintechs that are now right in 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 ours. He continues to be an investor of startups. And so for the early entrant, I think he's going to be in areas that are potentially less obvious as an entry band. 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, it's going to be, it's going to be harder.
Speaker 1Can 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?
Speaker 2I think most people still identify new bank as a Brazil neo bank or Latin American 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. 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 stable coin backed account because this is the beginning of continuing the market. Bring a consumer-obsessed culture in an environment and industry where customers just don't really care about their banking relationships, especially for the U.S. mass market.
Speaker 1What do you think is going to be the hardest part about competing in the U.S.?
Speaker 2Building a very strong brand will be one of the hardest things. U.S. consumers mention brand as one of the key attributes to choose banks, and it's not cheap. And we want to do it in a way where we obviously have a lot of financial resources, being a very profitable system. But we want to do it in a way that is smarter and more capital-efficient than simply come in and invest a ton of marketing all over the place. So building an organic brand in an environment where there are so many strong banking brands might be one of the most difficult challenges that we'll do. And that's critical to build trust with consumers because we want to become their primary bank account. That's what we aspire to do.
Speaker 1If I had every buy-side analyst that covers NewBank here, and you got to convince them of how they should think about your business, threefold. You mentioned return on equity earlier. Is that the metric that you would point them to as the barometer of how well you're doing? Are there other metrics that you would hope that investors would use to assess how good a job you're doing that are financial? How do you think about that?
Speaker 2Growth of number of customers and net promoter score and the cost to acquire that customer. So when you look at figuring out, have you hit a vein and are you growing in a way where you found an underserved market and you're able to offer a product that nobody else? We're able to offer, that's one of the key metrics, number of user count and PS, but then are you doing it at a sustainable pace because you can buy your way into growth by spending a lot of money in marketing. So what is the equation there? What is your LTV to CAC and ultimately what is your return on equity and the return on equity exemplifies the advantages that the business model could have when you compare it with the big incumbent banks in the countries that we operate. We don't charge a lot of fees. We literally charge no fee, so we have less revenue. But then we. We end up with a return on equity that is two to three X their return on equity that basically means that you found a cost structure advantage. You found a way to offer a product at better quality at a much lower cost. And if you find that in general is through technology, then you found yourself a moat. You found yourself a comparative advantage, especially in markets like banking that are in ways commoditized. So I think it would be also looking at that combination of return on equity talking about the U S one of the most interesting least appreciated aspect. Of it is that by now, some of the U S incumbent banks have higher return on equity are more profitable than emerging banking banks. There's some of the emerging market banks that we compete. That means your margin is my opportunity, right? The typical Amazon view or best of view of that incredible ROE that even incumbent banks have, even on top of the huge amount of cost that you're using to provide your product, that means there is a significant opportunity to undercut.
Speaker 1Who are your biggest influences? Like I know you've learned from some of the great entrepreneurs, some of the. Great. Great investors out there. Like when you think about your whole new bank chapter of your life, who are the people that jump out that have most actually influenced how you think about something? Who are they and why did they influence you the way they did?
Speaker 2We began the company as a reaction of a consumer pain of me realizing how bad consumer banking in Brazil was and how painful it was. And then realizing that this was a proxy for what the majority of the country was actually feeling. So we'll always admire companies that are very consumer obsessed. That know that to win, they need to be able to offer the best product and best service at a way that creates almost fanaticism. And so from that perspective, we were very inspired by Amazon since the very beginning, I was on being the more traditional consumer obsessed company and how they build this customer obsession and how they thought about it. about that. We studied Disney very carefully because this is a company that wants to create magic experiences. Maybe it's not super obvious, but even in banking, a boring banking product, we want to create a magical experience for customers.
Speaker 1What did you learn from Disney? That's an interesting one.
Speaker 2I think it's the communication that you create with consumers and just simply the magic aspect of it. When you enter a Disney park, the setup of that entry path that you have, it's almost like you're entering into a kingdom. And the service that you get from everybody that works inside Disney and how they treat the young children, spectacles that they create and the fireworks that they create, they're really thinking about how do you create a product that is magical in nature. And that's something that we push our teams around is for something as boring as sending money, how do you create a magic experience out of that? The welcome kit that we're sending to our customers here in the US, when they receive that welcome kit of the first credit card, the first debit card, we're trying to create a magical experience in that moment. And we're very inspired by that.
Speaker 1The customer obsession thing is something that sounds obvious now. Maybe Amazon really pioneered this way of thinking. Nothing's for free. What are the trade-offs associated with being so customer focused? It's become a popular thing to say, and the temptation is like everyone's customer focused to varying degrees. But what does that actually mean? What is the hard part about being so customer focused?
Speaker 2I think the hard part is, as with any cultural value, is to do something that's not just for the customer. And that's what we're trying to do. You do what you say you do. Like you see it in any company that has very nice sounding values on the wall. Then the question is, are they actually executing that? Especially when it's inconvenient. Most companies will be consumer obsessed, but then when they are suddenly seeing themselves making more money because they invented a new fee, then, oh, well, maybe I'm less consumer obsessed here and I want to make a little bit more money. And you're prioritizing the short term versus the long term. And actually in the entire AI debate, you actually don't hear that much conversation about customers. Because there is so much energy and focus around how to use AI for efficiency and optimization. There is much less conversation about consumer obsession here. And this is where humans still are beating the AI. So the biggest complexities is actually prioritizing this value, even when it's inconvenient to do so, especially from a financial perspective. But also the AI bro, the tech bro, is much more enamored today with the technology versus the AI. So the consumer experience itself.
Speaker 1I'm really curious how you think about your own product, like literally the thing I see on my phone versus your own agent versus new agents being introduced in the marketplace. Do you think there's a world where it actually matters that your marketing is to agents more than it is to humans? Like how do you think about that world or whether to provide your own interactive agents versus a product that you're clicking around in on your phone?
Speaker 2I think agents become a customer segment as important as consumers as a segment. And you have to provide a product for the agent. And I think that's a really important part of the agent, and you have to market to the agent, and you have to do SEO for the agent. It's the same way we have under 18 segment, and we have a small business segment. This is an entire segment, and we're treating it as a segment. We have a team dedicated to understanding that segment and understanding the needs of that consumer, which is the agent. So that will be equally important, but I don't think it's going to be necessarily 100% of that decision. Because I think still specifically in banking, and this might be different in other segments, for example, but in banking, you go back to trust and branding, and the human will want to know where your life savings are deposited, and there is the human aspect of that. And so you're still marketing to the human, and you're still building the trust with the humans. You've got to do both. And also for some products, there'll be more delegation, and for some products, there'll be less delegation. Specifically for areas like in Brazil, where we have 65% of the entire country as a customer, we have the opportunity to be that agent to the consumer. And the customer is coming directly to our app and asking our agent, for support specifically with financial products. And we can do it in a way where he's actually an open agent. He even provides product from third-party banks and third-party financial institutions. So there'll be a mix of this happening at the same time.
Speaker 1If I think back to our original conversation five years ago, and you just think about yourself, how you've changed the most in five years, or what surprised you the most in the past five years, what comes to mind?
Speaker 2One big change has been this view around five years ago, everybody was working remotely, including us. And over the five years, we've realized how important it is to at least spend some meaningful time in person in an office. And that's, I think, a bit counterintuitive, even from where you were five years ago. Also, in a perhaps counterintuitive way, increases the argument to spend time in person more, because increasingly, the work that AI can do is more or less the work that people at home individually could do. And so the individual at home will be competing with AIs, and we'll lose that battle. But the work around collaboration and coordination in presence physically, which is what humans need to do, is what needs to be happening inside the office. We went from remote to hybrid, and we're spending significantly much more time in the office. That has been one change. I think the second part is how the organization changes through AI specifically. We start paying attention to the technology, but when we tested it, it just didn't really work. Just to give you an example, we use a lot of Clojure as a programming language. And through 2025, we kept using a lot of the models for Clojure for programming specifically, and it wouldn't work. It was really awful. And so our most experienced engineer said, this is not going to work. And so we were testing, and Opus 4.6 came in in December of 2025, and that was sort of the moment that a lot of people suddenly realized, no, this actually works. We didn't catch that moment, that switch moment in December. We only catched it 60 days after, as a couple of my partners and I were in California, and we started meeting with a bunch of early stage entrepreneurs. And we said, well, something fundamentally happened. And we went starting to test a lot of the new models, the new GPT models from Clojure. And I said, well, we're going to test a lot of the new models, the new GPT models from Clojure. And they said, holy shit, this is actually working now. It can do Clojure very, very well. And we're 60 days where it made a huge amount of difference between us and best-in-class companies that were using AI. And so we went back to Brazil, and we went kind of a cold red around the entire organization. And we took a step back, and we're almost in the process of reinventing the entire organization. We mapped out 120 different workflows across the entire organization. Coding is one of them, but everything from how do you do product, design, know your customer flows, internal audit, compliance, regulatory capital management, every part of the organization, 120 workflows were reinvented natively using AI tools. We had to create a lot of eval infrastructure to be able to measure at every single step how these workflows get reinvented. And I would say we are more advanced in some, we're less advanced in other ones, but the entire organization is being reinvented. That's what's so exciting about this moment. And I think that's what's so exciting about this moment. And I think that's what's so important is we get to reinvent the way we do things with AI technology. And frankly, a lot of the times is that you see huge amount of productivity gains. It's not even because of AI. It's simply, there was always opportunity to be reinventing the way you do things actively. And if we were to do it now without AI, we would find a productivity gains. But AI just augments the possibility to do that. And that creates the opportunity, for example, for larger span of control, less manager, much more visibility. I personally went from having one direct report to 20 direct reports over that period, because it just increases your ability to operate horizontally. It's less layers on the organization. We went from 10 layers to five. So the organization went very horizontal. This is a bolt of adrenaline to the organization as well in terms of our ability
Speaker 1to execute. Can you say more about what made that possible? So what was happening at one direct report and 10 layers? And then now what's happening at 20 and five? I'm interested in literally like a day-to-day tactical thing. I'm sure most CEOs would rather have, you know, a flatter, higher bandwidth of information organization. So how does it work? Like what changed in that?
Speaker 2I think this is partly AI related. Partly is the way we manage our organization. I think for a period of time, as we start scaling significantly and we went from a million customers to 140, the organization just takes a little bit of inertia of itself and that starts adding layers. I think every fast scaling organization goes through the same process because you see things breaking all over the place, right? You have all these growth pains and the easy answer when things are on fire is to just add managers to solve the fire immediately. By sort of a natural organic process, we ended up very verticalized and we ended up with a structure that didn't give a lot of visibility. Partly what AI creates is that allows you to take a step back and reinvent everything about your business. This was a catalyst, I think, for us to think about the way we were structured.
Speaker 1Toby Lucchia has talked about this, how he can now ask the company stuff because of AI can tell him stuff. So the separation between the two is very important. The separation between him and ground truth based on data is gone. And that used to be this, I like this idea of the dictator's dilemma, that as someone gets more powerful at the top of an organization, it's harder for them to know what is real and what is true. How do you stay up to date on what ground truth is or what is happening inside the business when it's gotten so big?
Speaker 2Every part of that chain, there is a possibility for a message to get distorted and you get up the distorted vision by the time it navigates 10 different layers. So simply by removing a lot of those layers, you are much closer to the ground truth. And you reduce a lot of those layers by having information systems that have access to everything that's happening across the organization, a company brain that is proactive and reactive. It's actively sending me information about what we're doing from changes in our AI transformation to how we're doing around launching certain products or metrics or features. You get directly to the ground truth. There is more about a mentality of how do you actually also actively go directly to the ground truth when you're working with people doing the work. It's very comfortable as the organization takes its own shape to respect the channels. You'll see this in bigger organizations. manager and ask the question to somebody that is actually doing the work. There is a specific chain of command that needs to be respected. This is more related, I think, of traditional organizations. And here is more your approach of being a CEO. It's like, no, I want to go talk to anybody that I have a question with. And there is no respecting of a chain of command. Literally, I'll go to whoever has access to the best information if I have a question, or we're going to problem solve together if I see something that is not moving. So I think it's partly technology, partly it's culture and attitude of you're willing to be deep down integrated into the organization.
Speaker 1How do you think all of this will affect your company or any company's ability to raise the overall average talent bar in the business? How can you use this to see how good each person is and help them get better or move people on that aren't as good? Like, have you thought about the performance culture management part of the data and the technology yet?
Speaker 2I think it's going to be transformational. And I think this is an area that I'm surprised so few people have discussed about how AI is going to reinvent HR in the organizations. Because if you look at it the way it is today or for most organizations is your manager gives you feedback every six months, tells you what you're doing well, what you're not doing well. Generally, there's a lot of recency bias. So it's not really six months. It's like the last 30 days, what you did in the last 30 days, that's good or not. Generally, it's not very actionable. It's like, you're doing this well, you're doing not. Maybe you should do better. Imagine that's the type of feedback you would be giving an Olympic athlete. That would be crazy. You would never be able to succeed. Olympic athletes are somebody that literally every day is coaching them and providing potential feedback. That is the opportunity that ultimately AI is going to create for every single person in an organization is you have Olympic athlete type of coaching. And so what we're building at Nubank in our HR operations system is literally every day, depending on where you are, if you're an engineer or a designer or a manager, you're building on what you're doing. You're building on what you're doing. If your coding is reviewing your pull requests, and it's telling you not only how you're using these tools, but how could you use them better. And it's very actionable and it's very specific to what you're doing. If you're a designer, it's giving you feedback around how you're doing your job and how better you could do in your job. If you're a manager, managers right now have very little information, especially if you're managing a lot of people. That's the other thing about this large span of controls. There is this sense that you have to be having a lot of control over your time. You have to be having one-on-ones with every single person in your week. Those one-on-ones tends to be very low information density type of interchange. A manager that has access to all this information, this instrumentation is now seeing real time how every person in the team is actually doing and is allowing them to improve what they're doing.
Speaker 1How do you stay up to speed on AI capabilities? Who are the people you rely on? What are the things you like to read? I feel like you need to time box it every day. I could get one hour to read the updates or something. It's like SportsCenter for business.
Speaker 2I'll spend a lot of time on X. I think that's where you're seeing a lot of the development also. I have an agent that collates and summarizes a lot of the developments of what's going on on details. I block specific time in my agenda to use these tools and to build products. This is something that I hadn't done for a very long time. I coded a non-custodial crypto app, for example. And that's something that we've discussed at Nubank for a very long time to do. And I just went in and did a project. We asked all of our senior managers to build products every quarter, our actual software and products, so that we are integrated and very aware of what's going on. I don't think necessarily the answer is that I should be spending 70% coding. There are better people that will be much more productive coding than I am. But I think it's important for everybody in the organization to be actually not only reading, but actually using the tools actively to understand how fast the technology is going.
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Speaker 2I'm motivated by impact, by making it count, by doing something investing time and energy in something that has a meaning and that has some kind of impact. I went through a phase, even with NewBank, where I started thinking, is there more stuff that I should be doing beyond NewBank? I think all founders get starting on the company. The company then has a significant growth. And then you start asking your questions, what else could I be doing? Ultimately, I went through the other side of that analysis for about a year or two years, realizing that there's nothing else that I can imagine myself doing that could have more impact than taking NewBank for more money. And I think that's a big part of what I'm doing. I think that's a big part of what I'm doing. From where it is today to making it 10x larger and going from three countries to a hundred countries or from a hundred million customers to a billion customers. What this means in terms of impacting financial services, impact for people around the world, for billions of people access to financial services. And with that impact out there, it's impact internally too. It's like how I can also understand myself through bigger and newer challenges and how I can develop better as a leader to motivate an organization that has big ambitions. And with big technology, shifts like AI can either decide to stay behind or stay in front. I think this technology shift forces every organization to think in which side of this disruption do I want to be? I find that I'm more of a wartime general than a peacetime general. And so when a disruption, a change in the world happens, it suddenly is a source of motivation. I get more energized to actually continue to execute that mission.
Speaker 1What's an example of understanding yourself better because of growth? One of the questions that
Speaker 2I personally had as I scaled the business is, will we need to bring much more professional managers at some point? Because I didn't manage anybody before starting Nubank. And then suddenly I found myself being the CEO of one of the largest banks in Latin America and asking myself, well, what does the organization need right now? Do we need to go and hire a much more experienced manager? And we did. We went and hired a lot of external talent because I concluded or thought that I was going to need to hire a much more experienced manager. And I also then quickly realized that actually that's not what the organization needed. What the organization needed was more of what I had already brought into the organization, which was this clear leadership, the motivation, the willingness to think really big and to dream very big and get people excited about doing something that feels impossible at the beginning. Once something clicks and says, no, this is the right answer for me and for the organization, then I can continue to do what I'm doing with much more confidence, especially when there's changes and shifts. There was always a little bit of a Latin questioner. Am I pushing too hard? Am I asking too much from the team? Is this the right pace? And the answer after 13 years of doing this and being a little bit more confident is yes, I'm pushing enough. It's my job to push very hard and to dream very big and to shoot very high. And then the organization will react and will push back if needed. But it's helpful to have somebody that is actively pushing the boundaries of what perhaps the company is ready to do.
Speaker 1What is the hardest part of doing that for a long period of time?
Speaker 2The imposter syndrome. It's fine to be a founder at the beginning, but then suddenly when you see yourself running a very large organization, it's like, am I the right person leading this organization? You have to, through some thinking and through some experiences and through some feedback, conclude, answer that question for you at some point and answer it definitively on maybe for some reason you're not, but probably you are. That doesn't mean that it necessarily the founder will have all the answers and will have all the skills, you will need to continue bringing people that add a lot of complementary skills to you. But I think at least for me was surpassing that phase of having a voice in the head thinking, are you the right CEO for the business? And in making the shape between founder and CEO, because generally you will see founders having both titles, but they're very different functions. The founder and the CEO are very different functions. They don't necessarily fit with each other.
Speaker 1What's the key energy of each?
Speaker 2The founder, it's impatient, huge amount of sense of urgency. The founder will want to go run very, very fast, will move fast, extremely fast. The CEO will need to be more patient. The CEO will need to be more systematic in how it makes decisions. We'll have to bring generally much more systems thinking into scaling the organization. And sometimes those things collude. If you have to be impatient on one end, you have to be patient on the other end. There might be conflicts in that nature. Generally, you would think that CEOs are better managers. Founders don't tend to be good managers. Founders don't have a lot of patience or willingness to do one-on-ones and sit down and provide coaching to a team. They just want to run. A lot of the time, they tend to be much more ICs, individual contributors and managers. CEOs tend to be better managers because you have to build systems. You have to be thinking more from a system perspective. I think the key, though, for me has been to realize that the CEO title itself and the founder title, you can redesign in different ways too. And it's being able to do both. It's being able to have a little bit more patient when you need a little bit more patient. But generally, you want to maintain more the founder than the CEO. And I think that's why founder-led companies continue to outperform for decades. Because if you have to choose, you choose more the founder than the CEO mode, especially in environments where there are big technology shifts, where a lot of the advantages, the assets of the founder come to bear and are more obvious than necessarily the advantages of the CEO.
Speaker 1What was your lowest confidence moment, personally, in the entire history of the business? How'd you get through it?
Speaker 2I think you go through a lot of different phases. And I think scaling a business is hard, especially because you're consistently making decisions about situations that you don't really know. Like, for example, I wanted to build a technology company, but I was not an engineer myself. So I needed to go and hire great CTOs and build a great technology organization. How did I know how to pick a great CTO at that point if I didn't have the experience? Or credit, right? There is a lot of specific to financial services and credit expertise. So there was a lot of questioning inside, internally, a lot of the decisions that I made about building the team that made me ask myself the question, do we need to bring somebody with a lot more experience from a big bank or from a big organization to run the organization? For a period of time, it's this imposter syndrome that is asking you to make questions. It's like, are you the right driver of the car as the car becomes more complex and goes faster and faster and faster and faster?
Speaker 1What was the most emotional moment in the history of the business for you?
Speaker 2Passing a number of different incumbent banks in Brazil was very emotional because for 10 years, all we heard again and again and again, especially from the local experts, was that it was impossible to compete with any bank, that we were going to get crushed, that we were going to die, that these were the most trusted brands in the ecosystem, and that we had no shot at being successful, becoming the largest private bank in the entire country. It was something incredible. That was emotional in terms of what we were able to achieve from a point of scale. Personally, I was born in Colombia and I had to leave Colombia when I was eight because of all the security situation in Colombia as we grew up and I had to move to Costa Rica. And Colombia was then our country number three. The moment that I was able to launch Nubank in Colombia, which we did in a big event with the president of the country at the same time, was very emotional as well because it was a bit of coming back home and delivering. A product and a service that I thought was going to be very great for the country in an environment where I was being receptive by my people and it was videocasted and there were 100,000 people connected to the launch of Nubank in Colombia and it was very emotional too. It was very exciting.
Speaker 1With all this experience now running the business, how would you define great leadership? And I'm especially interested in the subtle points of what defines, in your opinion, a
Speaker 2great leader. I think first is vision. You have to be able to see something. Something that few people see, a world that is not as obvious right now. And I think with the massive information overload that we all live in, it's increasingly harder to have a differentiated point of view about something, about your industry, about your company, about how things are going to move. So you have to have some kind of vision about the future that is differentiated. But then you have to be able to sell that vision. And selling is about inspiring people. And a lot of the time that vision will be very different. It will be very hard or almost feel impossible. And the natural reaction of most people when they are presented with an impossible vision is to push back and to declare it non-realistic, right? This phrase, it's not realistic that this is going to happen. What is not realistic, right? I mean, look at every single meaningful development in the history of the world. At some point it was defined by somebody to be non-realistic. The amount of confidence that a lot of the experts or people use when they say it's not realistic. You have to be able to sell that vision in a way that a lot of people get motivated by that. That drives following and motivation. But then you have to be able to be a good listener and understand that sometimes you're actually going to be wrong. That vision that you have might not be fully complete. There is a mode in which you go against the consensus and you completely declare consensus as wrong. And you are the complete revolutionary. Nothing about the consensus makes any sense and you will reinvent absolutely everything. That is one mode. The other mode is you're consumed by consensus. You think about progress as being non-realistic and things will be the way they are today. What's hard I think about a great leader is you navigate in the middle. Consensus exists or status quo exists because you think about it from an evolutionary perspective. The vision of the world competed with other visions of the world and it won. And so the world we see today. That's superior to our possible wars that happen. And so there are elements of that status quo that exists because of a reason. And so you have to be able to understand what are those elements and they will continue to be here. But also you have to be able to fight that conventional wisdom to see what are the elements will need to be changed. And I think leadership is about knowing what doesn't have to change and pushing to change the things that have to change. That's a combination of conviction, but also active listening and humility. To know that you might not have all the answers and that you're going to need to change your mind actively when you do that. So combining all those different factors, I think is pretty critical for good leadership.
Speaker 1If we think over the next five years for NewBank specifically, I'd love you to paint what you think is like the bear case for the business and the case you worry about and are actively making sure it doesn't happen. And then if I think about my rose colored glasses on like the best possible story for NewBank over the next five years, I'd love to hear the two ends of the spectrum from
Speaker 2your perspective. The bear case is we are in these two countries. In Latin America, we've saturated them completely. Growth declines. We haven't really been able to find any other growth alternatives. From a customer perspective, I mean, we have 65% of Brazil, very soon we're going to run out of Brazilians. Ideally, we would see the natality rate in Brazil in current people having more children, but that's not happening. So we're going to run out of Brazilians. We did not succeed in internationalizing. We ended up being restricted to these three countries and growth saturated. That's the bear case. Partly of that would also mean that we. Could not take advantage of a lot of the AI opportunities that enables also. And so that's one reason why we're not able to internationalize. The bull case is the opposite of that is we truly took advantage of this thesis that we have around how much market share is going to be transferred from incumbent banks to digital native companies over the next two to three decades and how that is going to be accelerated by technology shifts like real time payment systems, open finance and AI. We're able to ride those tailwinds from technology shift. And we were able to execute through a multi-country platform, a global vision of new bank taking us to a hundred plus countries over the next few decades. And we were able to solve a lot of these big problems that we think that will be solved. 3 billion people don't have access to credit. Cash is becoming digital. More people need access to banking. If we have these cost structure advantage versus our competitors versus the industry players that still own 90% of the 10 trillion dollar profit pool, if we have a cost structure that is 50 X. And this is pre AI, then that meant we were able to pass a lot of the efficiency back to the customer via higher yields, lower fees, better experience, fully digitalized, integrating advice in our products and truly taking advantage of these internationalization opportunities. So that is the bull case.
Speaker 1When I had you last time, five years ago, I already asked you my traditional closing question. So I have a different one for you today, again, across new bank and the incredible experience that you've had building it so far, what is the most interesting lesson that you've learned about entrepreneurship?
Speaker 2How to quickly ignore the imposter syndrome and how the fact that you are the person that had the vision and the energy to build something out of nothing to give birth that already is giving you a level of care for that company so high that it will make you become the right leader for a very long time. I don't think anybody in the world cares as much. For this company, as I do right to a level that is almost visible, you're a father, right? You have children. Nobody will ever care so much about this company, about this company being successful than I will. And that will make you put so much energy and focus to make it successful to the point that that ultimately is what it's going to make you be the right leader for the organization for a very long time, independently of your expertise or your knowledge, or whether you have the right experience, just that insight, just that energy will make it the right person.
Speaker 1It seems like you could decompose that into have more faith in yourself and be really persnickety about the vision that you want to go work on. Because if it's not something that's like coming deep from your heart, from your gut, you won't get the benefit of this thing you just laid out. Do you think those are the right two parts of that really interesting insight?
Speaker 2Yeah. Especially the second part I mentioned around the mission. It's a luxury and a blessing to find a mission that you truly are excited about because then that will really make you go. the long way, scaling a company won't be easy, it will be much, more painful than anybody anticipates. And if you don't have the level of conviction for the mission will be just harder to go.
Speaker 1How would you encourage other people to do a good job on that search? Like if someone's searching for a mission that's perfect for them, any advice that you would give them or any sign that they've got the right one?
Speaker 2There is a level of serendipity there in luck. There is a level of search, of listening carefully, of feeling that this is a project, this is a problem that you truly care about. This is something that if you really care about, you are not sleeping because you're thinking about it. You cannot imagine your life continuing if you do not decide to tackle it. I think AI makes it harder, not easier. Just because the bar to start a company is now so much easier, you were probably just going to go and pursue problems that are easier to solve ultimately. I think that's why some of the best founders that we're seeing right now are going for the impossible, truly, right? There is this shift now into hardware and space and things that seem completely impossible because you're looking actively for those opportunities that will be harder and unique to you that you're going to get to believe that only you can really solve.
Speaker 1Incredible place to close. What an awesome closing thought. Interesting lesson. Thank you, as always, so much for your time. Thank you so much, Patrick. It was awesome. If you enjoyed this episode, visit Colossus.com. You'll find every episode of this podcast complete with hand-edited transcripts. You can also subscribe to Colossus, our quarterly print, digital, and private audio publication featuring in-depth profiles of the founders, investors, and companies. Learn more at Colossus.com/subscribe. Patrick O'Shaughnessy is the CEO of Positive Sum.
Speaker 3All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of Positive Sum. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of Positive Sum may maintain positions in the securities discussed in this podcast. To learn more, visit psum.vc. You know how small advantages compound over time? That's true in
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