Nubank charges on for a Mexican banking license
#077: AI meets WhatsApp.
Hola technopolists,
Globally, the Israel-Hamas cast a pall over Web Summit as its CEO resigned, and SBF’s American trial looks increasingly one-dimensional for tech’s prodigal son.
And in LatAM news, the past week was quiet. We saw continued investment activities with a few LatAm-focused TechCrunch headlines, and (as usual) Nubank had lots to shout about: specifically, this, this, and this. But, overall, larger news about crypto closures and globally low liquidity cast a pall. Read on.
What’s Hot
🏦 Nu Mexico’s bank license. The world’s largest neobank formally applied for a full-fat banking license in Mexico, its second-largest geography. Nubank has operated as a regulated quasi-bank after its acquisition of sofipo Akala in 2021, offering consumer credit cards and, recently, savings accounts. If granted, the license would not only allow Nu to serve mid-to-large enterprises, but would consolidate its massive lead over homegrown ‘neobanks’ that operate under much stricter authorisations. The application is under formal regulatory review by the CNBV, with no timeline set for a decision. Banking licenses of all forms under the country’s Fintech Law are notoriously tortuous — just ask Revolut, who entered Mexico 2 years ago and are still waiting. (Reuters, Bloomberg Linea)
🤖 Inteligencia artificial. While most headlines about generative AI focus on English-language applications, LatAm’s languages got some love last week. LuzIA, a WhatsApp-based AI-powered personal assistant in Portuguese and Spanish, raised a $10mn Series A with contributions from investment heavyweights like Khosla Ventures, FJ Labs, Globo Ventures, and even former LA Laker Pao Gasol. The company’s bots rely on a number of models, from Open AI’s GPT to Llama and Kandinsky, and are already compatible across most of LatAm. Regional companies, like Colombia’s Truora, have tested similar WhatsApp-based chatbots in the past, hoping to cash in on LatAm’s massive usage of the messaging platform. More in the Stat. (TechCrunch)
🚗 Mexico and Musk’s reassurance. Nuevo Leon, the Mexican state in which Tesla is set to build its new ‘gigafactory’, reassured the public that the EV manufacturer’s construction plans will go ahead in conjunction with a $130mn government infrastructure investment to service the plant. The day prior, Musk voiced hesitations about the project, saying that global economic uncertainty is impacting his decision around the construction timeline. Earlier in the week, Musk insisted that Tesla was"laying the groundwork to begin construction" in Mexico but did not yet have more definite plans. (Reuters)
What’s Not
🤑 Investor liquidity. Despite a decent Q3 for IPOs, global PE and VC investors are experiencing one of the worst years for exits in the past decade. According to data from Pitchbook, 2023 is on track to create $60-70bn in liquidity for VCs — a 90% drop from 2021’s peak and a 10% decline from 2022’s trickle. The trend is affecting private equity asset classes as a whole, with the FT reporting that PE firms haven’t seen cash returns this low since 2013. LatAm’s not spared: this year, we’ve seen a single SPAC, zero IPOs, and a 4-year low in M&As. (Pitchbook, FT)
⛓️ Ditching crypto. Two mainstream Brazilian financial institutions, XP Investimentos and PicPay, are axing their crypto brokerage platforms one year after launch following the sector’s choppiest year yet. PicPay cited ‘ongoing regulatory uncertainty’ in the crypto sector, while for XP it’s the second time that it’s launched and shuttered a crypto offering. Analysts cite low transaction volumes on both platforms, and Brazil’s central bank is likely to issue new rules in 2024 following a spate of serious crypto fraud investigations. XP and PicPay have paused new crypto purchases and have given customers until December 15th to liquidate their holdings. (Brazil Crypto Report, Fintechs Brasil)
Stat of the Week
In some ways, LuzIA’s product is one of the most common tech products in the book: an AI chatbot.
Should you be excited by a chatbot? Chatbots are ubiquitous, but they’ve truly exploded to become a $50bn global market.
But there’s a big difference: it’s on WhatsApp.
Brazil and Mexico are Whatapps’s second- and fifth-largest markets with a combined 210mn users, and LatAm regional penetration hovers at 64% of the population.
So, why is WhatsApp so important to the thesis? Let’s see what the data say.