Invest1 publisher3 min readPublished
Nubank opens its US bank on Lead Bank's charter with ten months on the OCC clock
Nubank launched US accounts through a sponsor partnership with Lead Bank while it works to capitalize a subsidiary the OCC has conditionally approved. It also launched a stablecoin account advertising 3.50%.
The Investor · Invest desk
What happened
- Brazil-based Nubank has launched its US bank operations through a sponsor partnership with Lead Bank, before being granted its own de novo bank charter.
- A Nu representative declined to comment on the specifics of the Lead Bank partnership, and Lead Bank did not respond to American Banker's request for comment.
- At the same event Nubank introduced Nu Global, a multi-currency account for international customers in which all deposits are converted into Circle's USDC or EURC.
- Nu Global customers can also hold and trade select cryptocurrencies including Bitcoin and Ether.
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Why it matters
- constraint Javelin's Lerner said the bridge partnership has constraints that would make effective long-term operation difficult, so the structure Nubank just launched under lasts only as long as the OCC's approval schedule allows.
- cost Advertising 3.50% APY on dollar stablecoin balances sets what Nubank pays to attract deposits it does not yet hold on a charter of its own, and that cost is carried by the group.
- contradiction Javelin describes the launch as a proven franchise bridging home success to a new market. KeyBanc sees a standing start against peers with tens of millions of active users. The two imply different odds on the same event.
- decision Because Nubank has not communicated a timeline for opening its own subsidiary, customers and partners are being asked to commit to an arrangement whose end date is up to the regulator.
Lead Bank holds the charter, so Nubank can open US accounts now and finish building its own bank later [1]. Nubank said the partner bank model lets it start serving customers and gathering feedback early [2]. A representative for Nu said the company "will prioritize ensuring a seamless experience for customers" [6].
I'd look at the timetable first. Nubank has 10 months to fulfill the OCC's conditions for final approval of its de novo charter [3]. The OCC's own stipulation is that a conditionally approved bank be capitalized within 12 months and ready to open within 18 [4]. So either two months of that window are already spent or eight, depending on which test the 10 months runs to [2].
The second launch is the one with a cost attached. Nu Global converts all deposits into Circle's USDC or EURC [8]. Nubank advertises daily yields of 3.50% APY on the dollar stablecoin and 2.20% APY on the euro one [9], a gap of 130 basis points [1]. Nubank said customers "can send and receive money across more than 35 countries with fast transfers free of charge, starting with Europe and Latin America" [11], and that "Integrations with Brazil, Colombia, Mexico and the U.S. are planned for the months ahead" [12]. Brazil is the company's home market [22]. Nubank did not immediately respond to American Banker's question on whether it will offer the advertised yield [13].
Two sets of analysts looked at the same launch and priced different risks. Dylan Lerner, digital banking senior analyst at Javelin Strategy and Research, said Nubank "has a cohesive strategy to bridge that success to the U.S." [17]. He put the timing down to policy: "I suspect that they have timed this in accordance with the OCC's openness to fintech expansion," he said, adding that the launch "may be more of a bet on regulators' timing than Nu's product" [15][14]. KeyBanc Capital Markets analysts wrote that "The U.S. market is represented by equally-to-more sophisticated fintech peers, several of which have meaningful scale in the tens of millions of active users" [18], and questioned Nu's ability to move share dynamics from a standing start [19].
I think the sponsor arrangement gets tested before the product does. Lerner said the bridge model has constraints that would make it difficult for Nu to operate effectively in the long term [16], so if final approval runs past the 10 months, the temporary structure becomes the operating one [3]. Two other things could also be true. If the US business is aimed mainly at the Latin American population, which is how the partnership was described [22], then peer comparisons on active users are counting a different pool [18]. And if Nu Global is the piece that scales, the 3.50% dollar yield is what Nubank pays to attract balances [9]. That view fails if Nubank capitalizes the subsidiary and opens on its own charter well inside 10 months [4].
Nubank's co-founder and US CEO said: "We want to earn the place of being people's primary banking relationship, and capturing even a small share of the U.S. market will be transformative for our business" [20].
What to watch
- Whether Nubank confirms the US subsidiary is capitalized inside the OCC's 12-month stipulation, and on what date.
- Whether the Nu Global integrations with Brazil, Colombia, Mexico and the US land on the promised months-ahead schedule.
- Whether Lead Bank's role ends when the subsidiary opens or continues alongside it.