Digital banks have already proved they can attract customers cheaply. Nubank and StoneCo report today after the close.
The bigger question for you is whether those customers can become more profitable without credit losses and funding costs rising just as quickly.
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Theme: Digital Banking, Payments, Deposits, Consumer Credit, and Financial Platforms
The Smartphone Changed Distribution
Traditional banking requires branches, employees, paperwork, and expensive physical networks.
Digital banks can open an account, issue a card, approve a loan, accept a payment, or sell an investment through a smartphone.
That dramatically lowers the cost of reaching customers.
The opportunity is especially important across Latin America, where digital platforms have been able to challenge traditional banks with simpler products and lower-cost distribution.
Customer Growth Is Only Step One
Acquiring millions of accounts looks impressive.
The harder part is getting customers to use more products.
A digital bank wants your salary deposit, card spending, loans, investments, and insurance to stay inside the same platform.
That is when an inexpensive account becomes a profitable financial relationship.
What’s Driving It
Nubank Is the Main Catalyst
Nu reports after today’s close.
The company ended Q1 with more than 135 million customers across Brazil, Mexico, and Colombia.
Revenue surpassed $5 billion, net income reached $871 million, and return on equity was 29%.
Monthly revenue per active customer reached roughly $16, while deposits increased 22% to $42.4 billion.
Those numbers tell you Nubank is no longer simply a fintech startup.
It is becoming one of Latin America’s largest financial institutions.
Credit Is the Next Growth Engine
Nu’s credit portfolio increased 40% year over year to $37.2 billion.
That is where the upside, and the danger, starts.
Deposits provide relatively cheap funding. Loans allow Nubank to generate much more revenue from each customer.
But every additional loan introduces credit risk.
Thursday’s results need to show that faster lending is producing attractive returns rather than simply larger balances.
StoneCo Attacks the Merchant
StoneCo also reports today after the close.
Stone began as a payments company serving Brazilian businesses. It has since moved deeper into banking, credit, and software.
That gives you another version of the same model.
Nu starts with the consumer and expands the relationship.
Stone starts with the merchant and does the same thing.
Inter Shows the Model Can Scale
Inter & Co. has already reported Q2.
Net revenue increased 31.7%, net income reached a record R$421 million, and return on equity climbed to 16.3%.
Its loan portfolio increased 29%, while funding reached R$77 billion.
That is exactly what you want to see from a maturing digital bank: more customers, deeper relationships, and improving profitability.
Here is the chain reaction:
Digital acquisition stays cheap → customer counts grow
Customers become active → deposits increase
Deposits provide funding → lending expands
Customers adopt more products → revenue per customer rises
Credit quality weakens → losses absorb the operating leverage
What’s Working
Deposits Are the Hidden Advantage
A digital bank does not simply want you to use its app.
It wants your money sitting there.
Deposits provide funding that can support credit cards, personal loans, mortgages, and other products.
Nu ended Q1 with $42.4 billion of deposits. Inter reported R$77 billion of funding in Q2.
The larger those balances become, the more valuable the customer relationship becomes.
Revenue per Customer Is Rising
Digital banking gets much more interesting when customer growth and monetization happen together.
Nu’s monthly revenue per active customer reached roughly $16.
Inter also reported record revenue per active client in Q2.
That suggests customers are doing more than opening accounts.
They are increasingly treating these platforms like primary banks.
Mexico Adds Another Runway
Nu passed 15 million customers in Mexico during Q1 and said the operation reached break-even.
That is important because Brazil cannot carry the entire growth story forever.
If Nubank can reproduce even part of its Brazilian success in Mexico, you get another large market with years of potential expansion ahead.
Merchants Create Their Own Flywheel
StoneCo and PagBank start with payments.
Once a business already uses the platform to accept transactions, the provider can add deposits, cards, credit, and software.
Payment data can also improve lending decisions.
That gives merchant-focused platforms another way to deepen customer relationships without building a traditional branch network.
What to Watch
Credit Quality Comes First
Nu’s 15-to-90-day nonperforming loan ratio rose to 5.0% in Q1, while its 90-plus-day ratio stood at 6.5%.
Thursday gives you the next check.
Watch delinquencies, provisions, cost of risk, and risk-adjusted net interest margin.
Growing loans is easy.
Growing loans while getting paid back is what matters.
Inter Shows the Same Risk
Inter’s loan portfolio grew 29%, but its 90-plus-day NPL ratio increased to 5.3% from 4.6% a year earlier.
That is the tension across the theme.
More lending creates more revenue, but it also increases the cost of underwriting mistakes.
Funding Costs Can Move Quickly
Interest rates in Brazil and Mexico affect both deposit competition and loan economics.
A digital bank can have a great technology platform and still face margin pressure if funding costs move higher.
When you read these reports, watch deposits, funding costs, net interest income, and credit losses together.
Nu Holdings (NU)
What it does: Nu operates Nubank, offering accounts, cards, deposits, loans, payments, and investments.
Why it fits: Nu is the direct catalyst and the scale leader.
It already serves more than 135 million customers and produced $871 million of Q1 net income.
What stands out: This is the scale-and-monetization story.
Nubank has proved it can acquire customers. Now you need to see rising revenue per customer without a corresponding deterioration in credit quality.
What to watch: Watch customer growth, deposits, revenue per active customer, credit growth, NPLs, Mexico, and ROE.
The Takeaway: Buy this first if you want the strongest digital-bank growth story in Latin America.
The risk is aggressive credit growth pushing losses higher.
StoneCo (STNE)
What it does: Stone provides payments, banking, credit, and software to Brazilian merchants.
Why it fits: StoneCo gives you a second direct Thursday catalyst.
What stands out: This is the merchant-finance turnaround.
Stone already owns the transaction relationship. The opportunity is using that position to sell more banking and credit products.
What to watch: Watch payment volume, active merchants, banking revenue, credit growth, provisions, and profitability.
The Takeaway: Buy this if you want a higher-risk merchant-finance recovery.
The risk is that expanding credit recreates old underwriting problems.
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Inter & Co. (INTR)
What it does: Inter offers digital banking, cards, payments, lending, investments, and insurance.
Why it fits: Inter gives you strong evidence that the model can produce better economics as it scales.
What stands out:
Q2 net income hit a record while ROE reached 16.3%.
This is the improving-unit-economics stock.
What to watch: Watch active customers, revenue per customer, loan growth, NIM, delinquencies, and ROE.
The Takeaway: Buy this if you want a smaller digital bank already showing improving profitability.
The risk is that credit losses rise alongside faster lending.
PagBank (PAGS)
What it does: PagBank provides merchant payments, digital accounts, deposits, cards, and credit.
Why it fits: PagBank gives you another merchant-to-bank model.
What stands out: This is the valuation-oriented option.
It can deepen relationships with merchants already using its payment network without needing to acquire every banking customer from scratch.
What to watch: Watch payment volume, deposits, banking revenue, lending, funding costs, and ROE.
The Takeaway: Buy this if you want merchant payments and digital banking at a less aggressive valuation.
The risk is weaker credit and funding economics.
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XP Inc. (XP)
What it does: XP operates investment, brokerage, wealth-management, and financial-product platforms in Brazil.
Why it fits: XP gives you the savings and investment side of the theme.
What stands out: This is the wealth-platform play.
As households accumulate more assets, XP can monetize investments without relying as heavily on unsecured consumer lending.
What to watch: Watch client assets, net inflows, advisor productivity, trading activity, and margins.
The Takeaway: Buy this if you want Latin American financial growth with less direct consumer-credit exposure.
The risk is that weaker markets reduce flows and activity.
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Now the Model Has to Mature
Latin American fintech has already proved smartphones can acquire customers more cheaply than branches.
Now those customers need to become profitable relationships.
Nu is the scale leader. StoneCo attacks the merchant. Inter is improving its economics. PagBank combines payments and banking. XP monetizes savings and wealth.
For you, the important numbers are no longer customer counts alone.
Watch deposits. Watch revenue per customer. Watch credit growth.
And above all, watch whether people keep paying the loans back.
Thursday will tell us whether digital banking can keep scaling without learning the oldest lesson in finance the hard way.
Best Regards,
— Adam Garcia
Elite Trade Club
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