Revolut and Nubank Face Steep Climb in Scaling US Banking

Revolut and Nubank, the world’s two most-valued digital banks, want to conquer the United States. Both companies obtained conditional approval for U.S. banking charters this year, and Brazil-based Nubank officially debuted its offering this month. However, the two FinTechs face challenges in cracking the highly competitive U.S. banking market. The companies are capitalizing on an “unusually lax regulatory window” in the U.S., and expectations for their American success have helped drive up their valuations. United Kingdom-based Revolut needs to justify its $115 billion valuation ahead of a planned initial public offering (IPO) in 2028. “The U.S. is the biggest prize,” said Nigel Morris, Capital One co-founder and managing partner of venture capital firm QED Investors, which is an investor in Nubank. “If you crack the U.S., it’s bigger than all of Europe.” Still, gaining traction in the U.S. banking space is difficult, with the market governed by multiple regulations and populated by lenders ranging from community banks, Wall Street giants and credit card companies. Other foreign FinTechs have fallen short. Monzo, for example, said earlier this year it would leave the U.S. to focus on its European business. However, Revolut and Nubank became household names in their home countries by taking on strong, established banks. Revolut is Europe’s most valuable startup, with 80 million customers in 40 countries and banking licenses in the U.K. and France. Nubank now has the most customers of any private sector lender in Brazil, and it has expanded into Mexico and Colombia. Generation Z consumers are essential to the neobank proposition, but their expectations are more demanding than simple app engagement. Generation Z averaged 425 digital activity days per month, which was over one-third more than the average consumer and more than double the rate of baby boomers. Gen Z consumers prefer integrated environments where payments, savings and spending live together. They manage finances with the same interfaces they use for commerce and communication.