Fintech
More and more neobanks are becoming mobile networks and Nubank wants in on the action
Nubank is taking its first steps into the realm of mobile networking, as Traded on the NYSE Brazilian neobank launches an eSIM (Built-in SIM) service for travellers. The service will give customers access to 10GB of free roaming internet in more than 40 countries without having to change their existing physical SIM or eSIM card.
The launch comes shortly after the news emerged first that the National Telecommunications Agency of Brazil (ANATEL) had given the green light to plans for Nubank to become a mobile virtual network operator (MVNO) in partnership with the wireless giant Clear. While the plan is still in the early stages and Nubank has not confirmed any of the launch details (the company also declined to comment for this article), we can now confirm that it is at least tiptoeing into the mobile network sphere – a trend in growth within the fintech fraternity.
Nubank CEO and Co-Founder David Vélez and his colleagues celebrate the company’s debut on the New York Stock Exchange in December 2021Image credits: NYSE (opens in new window)
From neobanks to neo-MVNOs
Neobanks, a new generation of financial institutions that serve as digitally native challengers to incumbent banking operators, follow in the footsteps of traditional banks by offering ancillary services to target new customers, such as budgeting tools, spending data and insights, and easy access to the stock market. While neobanks have increased in popularity, the same goes for the MVNO (virtual mobile network operator), driven by the rise of eSIM, cloud and the proliferation of third-party software that make all-digital distribution strategies a no-brainer.
Nubank sits at the intersection of these trends.
The Brazilian company, founded 10 years ago, has been in crisis of late, its valuation rising about 170% in the past year and hitting an all-time high of $58 billion in March. The company swung from a net loss of $9 million in 2022 to a net profit of $1 billion last yeara trend that will continue into 2024 record revenue in the first trimester e its net profit more than doubled on the corresponding period of the previous year. Nubank also passed by 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 like insurance, higher credit limits, cashback, family accounts and more.
Last month, Nubank revealed that it was enter the travel industry with the upcoming launch of a new “global account”, in collaboration with Wise European fintech to offer Ultravioleta subscribers international money transfers at low rates. In this context, the company is now launching an eSIM service for those who own compatible smartphones, with 10 GB of data for travelers in the United States, Latin America and Europe. The eSIM is activated via the Nubank app, with the underlying infrastructure powered by Concertsa platform that gives budding mobile network providers everything they need via a single API, basically what Stripe has done in finance, but for mobile phone plans.
Gigs is backed by the likes of Gradient Ventures, Google’s early-stage venture capital arm, and Uber CEO Dara Khosrowshahi.
“Bundling of mobile plans represents a powerful lever for neobanks to turn irregular users into monthly paying subscribers, encourage upgrades to premium features, and create an ecosystem where banking serves as a hub for multiple value-added services,” co -founder and CEO of Gigs Herman Frank he told TechCrunch.
Nubank’s launch echoes movements elsewhere in the fintech fray. In February, Revolut-a $25 billion British neobank — has launched a similar eSIM service for premium subscribers. And last year, The Indian neobank Zolve Also added mobile networks to its arsenal of services so that immigrants can not only open their own banking system before arriving in the United States, but also have a mobile service also ready upon arrival.
This highlights the synergies between financial services and mobile communications: both are essential for people to function today, but both traditionally present similar barriers, particularly for those arriving in a country for the first time. We have seen operators launching banking services AS T-Mobile did it in the US with T-Mobile moneywhile traditional banks have also gone in the opposite direction, highlighted by the Brazilian Banco Inter AND Standard Bank in South Africa both have launched their own MVNO services.
“Our interaction with the bank today is already focused on our mobile number, both for the banking operations themselves and for security checks,” Allan T. Rasmussen, a telecommunications industry consultant, analyst and MVNO specialist told TechCrunch. “Mobile operators are entering the banking business, 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 an important role in their respective offerings, often only with online support and account access. It’s also both marketed as having lower overhead, which gives them greater agility and ability to offer lower prices than incumbents. And as we’ve seen with Revolut and now Nubank, eSIMs are pushing this cross-pollination even further, as they compete for mindshare, revenue and access to customer data and touchpoints.
“To succeed as an MVNO, you need a distribution channel – this is the first test of your presentation to an operator,” James GreyCEO of telecommunications consultancy firm Gray stone strategy, he told TechCrunch. “Banks already have this with traditional banking services or through websites and apps. However, the recent move by Revolut – and I suspect other neobanks in the future – is interesting because these are not traditional organisations. Their whole job is to challenge the status quo and they are doing it very successfully in the banking sector, so why not a merger between banking and telecoms? They have the channels and the brand pull.”
MVN… no?
One small problem: neobanks are not actually positioning themselves as MVNOs with their new travel eSIM services. A Revolut spokesperson told TechCrunch in February: “Revolut is not becoming an MVNO but has partnered with 1Global which brings together many MVNOs and roaming access agreements into a single network to create a global footprint of the best operators.”
MVNOs are independent mobile services built on the operators’ infrastructure, and there are many different mobile virtual network enablers (MVNEs) and aggregators (MVNAs) on the market (such as 1Global) that help companies launch mobile networks, taking care of the provisioning of the SIM, billing and similar Like. While Revolut doesn’t offer voice and SMS, or assign a phone number, it still relies on the operator’s infrastructure via an MVNE to offer its own branded mobile data service, which looks a lot like Revolut becoming an MVNO.
But calling itself an MVNO may require additional regulatory scrutiny. While banks are already strictly regulated as financial institutions, being classified as a telecommunications company would likely result in additional regulatory obligations. This is something we’re seeing happen right now in the United States, with the Federal Communications Commission (FCC) trying to determine whether connected cars should be classified as MVNOsfollowing the a New York Times report about how connected cars are used by abusive partners to track down their victims.
While Nubank is indeed preparing to launch an MVNO service in its home country of Brazil, its travel eSIM service is easier to bring to market thanks to its partnership with Gigs, as that partner takes on all the regulatory compliance complexities that come with territory.
“Telecommunications is a highly regulated industry in all countries and a key part of Gigs’ end-to-end value proposition is that we eliminate all regulatory complexity for our customers,” Frank said. “To do this, Gigs almost always acts as a licensed 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 industry.”