Why Nu Holdings Remains a Buy Despite Brazil's Economic Slowdown

In the shadow of Brazil's economic slowdown, Nu Holdings (NU) has emerged as a paradox: a company that thrives on financial inclusion while navigating macroeconomic headwinds. For investors, the question is not whether Brazil's challenges will persist, but whether Nu's strategic expansion into Mexico and its relentless focus on unbanked populations can offset these risks. The answer, as we'll explore, is a resounding yes.

Nu's Dominance in Brazil: A Foundation of Resilience

Nu's core business in Brazil remains its most compelling asset. With over 10 million customers and $4.5 billion in deposits by late 2024, Nu has carved out a dominant position in a market where 16% of adults remain unbanked. Its 100% digital model—offering no-fee credit cards, low-cost debit accounts, and secured loans—has resonated with Brazil's middle class, particularly in rural areas where traditional banks have been absent.

Even as Brazil's GDP growth stagnates, Nu's customer base continues to expand. The company's ability to leverage Brazil's fragmented financial landscape—where 90% of payroll accounts are concentrated in four banks—positions it to capture market share as more Brazilians seek alternatives to high fees and limited access.

Mexico's Banking License: A Strategic Leap into a New Frontier

Nu's recent approval of a banking license in Mexico marks a pivotal moment. As the first Popular Financial Society (SOFIPO) to transition to a full bank in the country, Nu Mexico now has the regulatory green light to introduce a payroll account—a product that could revolutionize financial inclusion in a nation where only 36% of adults have one.

The implications are staggering. Mexico's unbanked population, estimated at 43% in 2021, represents a $150 billion opportunity. By expanding deposit insurance coverage 16-fold through Mexico's Institute for the Protection of Bank Savings (IPAB), Nu can attract risk-averse customers who have historically avoided traditional banks. This move also allows Nu to challenge local fintech giants like Mercado Pago and Revolut, leveraging its Brazilian playbook of low fees and digital-first services.

The Unbanked Population: A Catalyst for Long-Term Growth

Latin America's unbanked population remains a critical tailwind for Nu. As of 2025, the region still has 122 million unbanked individuals, with Colombia (40%), Peru (43%), and Argentina (28%) leading the pack. These figures are not just numbers—they represent a demographic starved of access to credit, savings, and digital tools.

Nu's expansion into Mexico is just the beginning. The company's digital infrastructure, which already reaches 98% of Brazil's municipalities, can be replicated in other Latin American markets. With 61% of the region's population now part of the consumer class (up from 29% in Africa and 43% in Asia), demand for financial services is surging. Nu's ability to offer tailored products—like its secured credit cards for building credit history—positions it to capture this demand long before traditional banks can react.

Countering Macroeconomic Headwinds: Why Nu's Model Is Resilient

Critics argue that Brazil's economic slowdown, marked by high inflation and political uncertainty, will hurt Nu's growth. However, Nu's business model is uniquely suited to such environments.

1. Low-Cost Digital Infrastructure: Nu's operating expenses are a fraction of traditional banks', allowing it to maintain profitability even in a low-margin environment.
2. Diversified Revenue Streams: While Brazil's economy falters, Nu's expansion into Mexico and its growing fintech partnerships (e.g., with MercadoLibre) diversify revenue sources.
3. Regulatory Tailwinds: Latin America's push for financial inclusion—driven by governments and institutions like the World Bank—creates a favorable environment for Nu's expansion.

Investment Thesis: A Buy for the Long Haul

For investors, Nu's combination of regulatory momentum, unbanked market potential, and digital-first innovation makes it a compelling buy. While Brazil's macroeconomic challenges are real, they are not unique to Nu. The company's ability to pivot to new markets and leverage its Brazilian expertise in Mexico ensures that its growth trajectory remains intact.

Moreover, Nu's stock valuation, currently trading at a discount to its fintech peers, offers a margin of safety. With a forward P/E of 12x and a projected EBITDA margin of 25% in 2025, the company is undervalued relative to its growth potential.

Conclusion: The Future of Financial Inclusion Is Digital

Nu Holdings is not just a fintech—it's a movement. By democratizing access to banking in Brazil and now Mexico, it's addressing a systemic issue that has plagued Latin America for decades. For investors, this is more than a stock; it's a bet on the future of financial inclusion in one of the world's most underbanked regions.

In a world where cash is losing its grip and digital payments account for 60% of consumer spending in Latin America, Nu is not just surviving—it's thriving. And that makes it a buy, even in uncertain times.