Nubank is taking its first tentative steps into mobile networking as the NYSE-traded Brazilian neobank rolls out an eSIM (embedded SIM) service for travelers. The service gives customers access to 10 GB of free roaming internet in more than 40 countries without having to change their own existing physical SIM card or eSIM.
The launch comes shortly after the news came up for the first time that the Brazilian National Telecommunications Agency (ANATEL) had quietly given the green light for Nubank to become a mobile virtual network operator (MVNO) in partnership with wireless giant Claro. While that plan is still in its early stages and Nubank hasn't confirmed launch details yet (the company also declined to comment for this article), we can now confirm that it's at least tiptoeing into the mobile networking sphere – a growing trend within the fintech fraternity.
From neobanks to neo-MVNOs
Neobanks – a new breed of financial institutions that serve as “digital-native” challengers to established incumbent banks – are following in the footsteps of traditional banks by offering additional services to reach new customers, such as budgeting tools, data and spending insights, and easy access to the stock market. While neobanks have soared growing in popularity, as is the MVNO (mobile virtual network operator) market, driven by the rise of eSIM, the cloud and the proliferation of third-party software that makes fully digital distribution strategies a breeze.
Nubank is at the intersection of these trends.
The 10-year-old Brazilian company has been on a slump lately; its valuation rose about 170% over the past year, reaching a record high of $58 billion in March. The company bounced back from a $9 million net loss in 2022 to a net profit of $1 billion last yeara trend that will continue in 2024 record revenues in Q1 and net profit has more than doubled compared to the corresponding period of the previous year. Nubank also passed 100 million customers in its core markets of Brazil, Mexico and Colombia, where it operates a range of services including bank accounts, credit cards, loans, insurance, investments and – now – a mobile data service for travellers.
The new service is aimed at customers of Nubank Ultravioleta premium subscription launched three years ago with bundled benefits such as insurance, higher credit limits, cashback, family accounts and more.
Last month, Nubank revealed that it did enter the travel sector with the upcoming launch of a new 'global account', partnering with European fintech Wise to offer Ultravioleta subscribers low-cost international money transfers. As part of this, the company is now launching an eSIM service for those with compatible smartphones, offering 10GB of data for travelers in the US, Latin America and Europe. The eSIM is activated via the Nubank app, powering the underlying infrastructure Performancesa platform that gives aspiring mobile network providers everything they need through a single API – what Stripe has done in the financial world, but for mobile phone plans.
Gigs is backed by Gradient Ventures, Google's venture capital arm, and Dara Khosrowshahi, CEO of Uber, among others.
“Bundling mobile plans represents a powerful lever for neobanks to convert infrequent users into monthly paying subscribers, encourage upgrades to premium features, and create an ecosystem where banking acts as a hub for multiple value-added services,” said Gigs co-founder and CEO Herman Frank told JS.
Nubank's launch echoes elsewhere in the fintech battle. In February, Revolut launched – a $25 billion British neobank — launched a similar eSIM service for premium subscribers. And last year also the Indian neobank Zolve mobile networks added to its arsenal of services so that immigrants can not only get their banking set up before arriving in the U.S., but also cell service is also ready to use upon arrival.
This highlights the synergies between financial services and mobile communications – both are essential to how people function today, but both traditionally face similar barriers, especially for those arriving in a country for the first time. We have seen it airlines launching banking services as T-Mobile has done in the US T-Mobile moneywhile traditional banks have also gone the other way, as evidenced by Brazil's Banco Inter And Standard Bank in South Africa both of which have launched their own MVNO services.
“Our banking interactions today are already focused on our mobile number, either for banking itself or for security checks,” Allan T. Rasmussen, a consultant, analyst and MVNO specialist from the telecom sector explains to JS. “Mobile operators are entering the banking industry and trying to become banks themselves, and traditional banks and fintechs are doing the same by becoming MVNOs.”
But neobanks in particular are synergistic with MVNOs: they are both 'virtual', with technology playing a major role in their respective offerings, often only offering online support and account access. They are also both marketed as having lower overhead costs, which makes them more flexible and able to offer lower prices compared to incumbents. And as we've seen at Revolut and now at Nubank, eSIM is further driving this cross-pollination as they compete for mindshare, revenue and access to customer data and touchpoints.
“To be successful as an MVNO you need a distribution channel – that is the first test of your pitch to an operator,” James Graygeneral manager at consultancy in the telecom sector Graystone Strategy, told JS. “Banks already have this through high street banking or via websites and apps. However, Revolut's recent move – and I suspect other neobanks will be in the future – is interesting because these are not traditional organizations. Their whole mission is to challenge the status quo and they do that very successfully in banking, so why not a merger of the banking telecom sector? They have the channels and the brand appeal.”
MVN… no?
One small catch: the neobanks aren't really positioning themselves as MVNOs with their new travel eSIM services. A spokesperson for Revolut told JS in February: “Revolut will not be an MVNO, but has partnered with 1Global which brings together many MVNO and roaming access agreements into a single network to create a global footprint of the best carriers.”
MVNOs are independent mobile services built on top of carrier infrastructure, and there are many different mobile virtual network enablers (MVNEs) and aggregators (MVNAs) that help companies launch mobile networks and take care of SIM provisioning, billing and the like . like it. While Revolut doesn't offer voice and SMS, or assign a phone number, it still relies on carrier infrastructure through an MVNE to offer its own mobile data service, which is a lot like Revolut becoming an MVNO.
But calling itself an MVNO could lead to additional regulatory scrutiny. Although banks are already highly regulated as financial institutions, being classified as a telecommunications company would likely impose further legal obligations. This is something we see happening now in the US, with the Federal Communications Commission (FCC) trying to determine whether connected cars should be classified as MVNOsin response to A New York Times report to how connected cars are used by abusive partners to track their victims.
While Nubank is indeed preparing to launch an MVNO service in domestic Brazil, the travel eSIM service is easier to market thanks to the partnership with Gigs, as that partner takes on all the complexities of regulatory compliance takes associated with the area.
“Telecoms is a highly regulated industry in all countries, and a key part of Gigs' end-to-end value proposition is that we remove all regulatory complexity for our customers,” said Frank. “To do this, Gigs almost always acts as the licensed data carrier, meaning the burden of compliance falls on Gigs and not our customers. This allows our customers to launch their own mobile service without legally becoming a provider in a regulated sector.”
