Tchau: N26 exits Brazil 👋🇧🇷; Coinbase beats Q3 earnings despite falling trading volume 📈; Biden's AI executive order targets bias in financial services 🤖🏦

FinTech is Eating the World, 7 October

Hey Everyone,

Happy Tuesday! Today we’re going to look at N26 exiting Brazil (the writing was on the wall all along + more reads & deeper dives), Coinbase which managed to beat Q3 earnings despite falling trading volume (recap of their latest numbers, what’s the most important stat + why I’m bullish on them), and Biden's AI executive order (what it’s all about + what it means to build the AI bank of the future). Let’s jump straight into the cool stuff 🌶

Tchau: N26 exits Brazil 👋🇧🇷

The news 🗞️ German digital bank N26 is shutting down operations in Brazil just 7 months after finally launching its app there, marking the latest setback for foreign FinTechs attempting to challenge dominant local players in Latin America's largest economy.

Let’s take a look.

More on this 👉 We can remember that N26 entered Brazil in 2021 with ambitions to reach 100 million global customers, positioning itself as a fincare company helping Brazilians manage their finances.

However, the Berlin-based startup faced an uphill battle against deeply entrenched local competitors like Nubank NU 0.00%↑ (the absolute beast) and Inter. After testing its app with 2,000 Brazilian customers, N26 is now retreating from the market to focus on its core European operations.

N26's retreat follows a pattern of stumbles in overseas expansions. After pulling out of the UK and US in 2021, the company is narrowing its focus to continental Europe.

✈️ THE TAKEAWAY

Looking ahead 👀 At the core, N26’s withdrawal from Brazil reflects the difficulties foreign FinTechs have penetrating Latin America’s largest market. With established national champions boasting millions (or tens of millions!) of local customers already, new entrants face substantial customer acquisition costs. N26 also probably struggled to attract sufficient funding, not to mention customers to sustain its Brazil operations (its waitlist was kinda ridiculous to start with….). Zooming out, N26's exit illustrates the challenges even well-funded FinTechs face when trying to dislodge established national champions on their home turf. Especially when it comes to the Americas. To win in LatAm, robust localization strategies and substantial war chests are not enough. Joint ventures or mergers with local players who already have the scale, brand recognition, and regulatory know-how to operate successfully across LatAm might be the only viable option going forward. But even then I might not bet against NU and the local team…

P.S. for N26, the writing was always on the wall:

(July 2023) Should N26 leave Brazil? 🇧🇷 [why the exit is more than logical + some deeper dives into N26’s biz]

P.P.S. next on the exit list - Revolut:

Doomed to fail? Revolut goes live in Brazil 🇧🇷 [why I don’t think it will succeed there + deep dives into Revolut]

ICYMI: A path towards $100 billion FinTech Giant: Nubank applies for a banking license in Mexico 🇲🇽🏦 [why this is a huge step forward + a deeper dive into NU & dLocal]