[Transcript] Building a Customer-Centric Culture with David Vélez, Founder and CEO of Nubank

In our latest episode of the Wharton Fintech podcast, Miguel Armaza is joined by David Vélez, Founder and CEO of Nubank, the largest independent digital bank in the world. Nubank has over 25 million clients and has raised over $1.2 billion from some of the most prestigious venture capital funds in the globe, including Sequoia, Ribbit Capital, DST, Kaszek Ventures, QED, and many more.

Miguel Armaza 01:45

Welcome, David and thank you for joining us on the Wharton FinTech podcast. We’re very excited to have you here. Can we start by you telling us a little bit about yourself and your background?

David Velez 01:54

Sure. So I’m originally from Colombia. I was there until was eight- my family had to move to Costa Rica, when Colombia was going through really tough times, and I went to school in the US, did engineering. I come from a family of entrepreneurs, my dad has 12 siblings, all of them entrepreneurs of small companies. But that was a bit of the DNA. A bit of the kool-aid that I drank at home, was that you had to start your own business, that you had to go on your own, that you shouldn’t have a boss. So that’s a bit of what I heard every single day from home. And that was the idea when I went to school to study engineering.

However, after four years of undergrad, had no idea how to even begin to start a business. Was completely frozen, immobilized trying to come up with a great idea and even begin creating a startup. And so I took the more traditional route of financial services, did investment banking in New York for a few years, then went to private equity with a firm called General Atlantic, that was starting to open our offices In Latin America, I happened to be their closest thing that they had to a Brazilian. And so with that, they invited me to open their office in Brazil. So I moved to Brazil to Sao Paulo in 2008 to open GAs office in Brazil, it was a great opportunity to just look at a number of different industries across Latin America, especially financial services. I was spending a lot of time in financial services, working very closely also with a gentleman named Nigel Morris, who’s the Co-Founder of Capital One. And I learned a lot about Nigel, I learned a lot about the Capital One case and I was really interested in financial services as an industry that has just a ton of impact in the region. Also, an industry that surprisingly showed profits and growth through decades and decades with no interruption, even though Latin America has had pretty significant cycles. After three years at GA, I felt that I wanted to now really go on my entrepreneurship route, but did that through an MBA, went back to school to do an MBA. And the idea was to spend two years focusing on an idea but then another firm, Sequoia Capital, showed up and said, hey, we’re thinking about Latin America, why don’t you come and help us think where we should open an office for Sequoia here in Latin America. And that seemed like a great opportunity, even though I didn’t really want to do investing anymore. I thought I could learn a ton from a firm like Sequoia especially doing early-stage investing. So I ended up working with Sequoia for about two years in parallel of doing business school at Stanford. It was great just great being able to be at school and back at Sequoia flying to Brazil, to Mexico, to Colombia.

After graduation, I moved to Brazil to open Sequoia’s office in Sao Paulo. But maybe about five months after, we sort of came to terms with a sad realization that while Latin America obviously had a pretty big market and was a really relevant part of the world, there were very little interesting startups, the tech ecosystem didn’t really exist. And the few startups that you saw in Sao Paulo, mainly, were direct copycats of Silicon Valley startups that frankly, we’re not really solving any real problem. And so for a firm like Sequoia that is, you know, used to backing some of the best companies, some of the biggest companies in the world, it was just not interesting enough to go back the clone of, you know, whatever startup somebody in Silicon Valley was doing. And so with that, after coming to terms with that, I didn’t really want to do investing anymore. I didn’t really want to be based out of California anymore. That was sort of my cue to say Okay, finally, this is the time to go on my own. I left Sequoia and spent about two months back in Colombia and Brazil thinking about what to do. Focused very quickly in financial services. Also because I had a pretty tough time opening a bank account in Sao Paulo, when I moved to Sao Paulo for the first time, I had to go to a banking branch and it was the most painful experience I ever had in my entire life. I would describe it as almost going to jail because you have to go to these bulletproof doors, you have to leave your wallet and your cell phone and your bag in a locker outside the branch and go through the bulletproof door and wait 60 minutes and then talk to a branch manager that has a horrible attitude that is always thinking I’m doing you a favor, opening your bank account, and it’s not like, oh, let me really serve you. I had to go to the banking branch maybe 10 times in the course of four months to eventually open a bank account that charged me about $30 per month, an interest rate that had that was over 400% a year. So I could not digest the fact that customers and people in Brazil were going through that customer experience- had to endure that. While at the same time you have five banks that own 90% of the entire banking system. That there was no competition, there was nobody competing and that this banking oligopoly also showed some of the highest profitability in the world. And so understanding that sort of industry and also understanding what technology was doing, came to that idea of Nubank. Of building a fully digital bank, focused on the consumer experience, and being able to pass the efficiency of the business model to the end consumer by not needing to charge that many fees and offering a better user experience.

Miguel Armaza 07:39

That’s very interesting. Now, David, this is a common problem across emerging markets. Did you happen to find some inspiration elsewhere, prior to launching Nubank? Did you see some examples that perhaps gave you an idea of what you wanted to build?

David Velez 08:01

Sure, we are in the intersection of financial services and technology, right? In financial services, as I mentioned, Capital One was a big inspiration. Capital One is a fascinating case study of how, as a startup in the early 90s, they saw a very commoditized banking market in the US every bank charged 19.8% APR for all credit cards independent on the risk, the APR was exactly the same. Capital One, even though they were pre-internet, pre-big data, pre-mobile, they were able to use a strategy of data and analytics and marketing to segment the credit card market in the United States. And over the course of 10 years, they became the fifth-largest bank in the US. And they built a really differentiated culture- very focused on data, very focused on analytics, very focused on recruiting incredible analytical talent. So that was a big inspiration. Especially when I compared that to the banks in Latin America, and frankly, a lot of companies in Latin America, they’re very much run by intuition, by what the boss thinks is the right thing, it’s not based on data, they’re not based on testing. They’re not necessarily going the extra mile in hiring phenomenal technical talent.

We also run into a company in Russia called Tinkoff Credit Systems. Which in a way was the Capital One 2.0, or the Capital One of Russia. I went to Moscow, met with them and it was very interesting to see how they had looked at the Capital One case, but they had built it for Russia in a post-internet, pre-mobile era. So they still not necessarily were smartphone-first, but they were already using the internet to provide a better user experience for customers. So those were two big inspirations in financial services.

And then I was very much inspired by a lot of technology companies. I spent a lot of time really understanding Amazon, really understanding Netflix, understanding the cultures of those companies. Again, in Latin America, even in 2012, there were no real technology companies. A lot of the companies had been more of a, you know, they just go and they outsource the technology, they outsource the engineering, and it’s the business person seeing technology as an input, not seeing technology as a core differentiator. What we wanted to do at Nubank is that we are a technology company that happens to be in financial services. We’re not a financial services company that is using technology. So that might seem like a small detail, but it makes all the difference. It makes a difference in how we think about our competitive advantage. It makes a lot of difference in how centralized or how important the engineering function is and the core of our business. How the bar that we have in terms of hiring engineers, and having a global talent pool and building a culture of a technology company. A culture that is very horizontal, that is not that hierarchical. That is fast, that’s agile, that takes risks, again, very much different from the traditional banks and very much different than traditional Latin American companies.

Miguel Armaza 11:12

Sounds like you avoided bringing a lot of the legacy mentality and legacy frameworks. from banks by thinking technology first, right?

David Velez 11:25

Yeah, no, exactly. I think starting with a white piece of paper is always a huge opportunity, right? And we use that white sheet of paper to reinvent the business model to bring it to financial services, as well as to think how do we use the latest technology to build financial services on top of it, as well as how do we start with a culture from a white piece of paper. What is the type of culture we want to create? Being very mindful since the very beginning. There’s a lot of companies a lot of startups, especially in Latin America where I heard “Ah, I’m too busy to build culture. I’ll worry about that when we are successful and we grow up.” And one of the things I learned at Silicon Valley and learned with Sequoia was that the culture of a company is built in the first six months by the first 10 or 15 employees. Either you’re mindful or not, the culture is going to get built. And so those early days, those early months are really a critical point in the development of the company to set up the right basis for the culture and we were super-mindful about how we built that.

Miguel Armaza 12:32

Now, we’re talking today at a point where Nubank has over 25 million clients. You’re a team of thousands of people. Take us through precisely this, what you’re talking about the culture, how did you approach this at the early onset, and how has it evolved over time?

David Velez 12:51

Sure. So when I as I mentioned, we thought that having a very clear understanding of the culture in the very, very, very, very first second of the game was critical. I remember the first thing that I did to build Nubank was to build two PowerPoint decks. One was the pitch of Nubank that I used to raise our seed round. The second one was the culture pitch, the culture deck that I used to recruit my co-founders and recruit our first employees. And if you look at the deck of our culture deck, it hasn’t really changed in seven years since we started. A couple of things. We’ve changed some words, we’ve changed some concepts. It’s been a deck that we’ve we socialized with that first group of 10–15 employees. After we were working for about six, seven months together. We had a couple of offsites, we discussed those values, but fundamentally it has remained very much similar. The first value has been we are a customer-focused company, we think about the customer’s pain and then we work backward to build a business model, which is fundamentally different than big companies or banks, especially banks tend to operate. And then on top of that, with that first value insight, then we have a number of values that describe the type of organizational culture that we want to have. We want people that are young and that want to challenge the status quo. That will come to really challenge industries, but challenge ourselves to do things differently. We like to hire people that have, we say, heads full of questions, not full of answers. A lot of companies tend to go and hire the person that has 40 years of experience at something. The problem when you hire somebody that has 40 years of experience is that you have a head full of answers. You already know how things are. So it’s very hard for you to reinvent, it’s very hard for you to challenge that status quo. So we love people that are young, that are creative, that come to challenge absolutely everything. We like to have an organizational structure that is very horizontal, where since the very first day, we’re asking you what you think, we’re asking you for your opinion, you have the ability to impact the organization. There is this ownership mentality, where you can really go and impact the organization. And so, obviously, executing some of those values sometimes becomes hard as you scale from 10 employees to 2700. But the fundamental nature of those values doesn’t need to change. So the culture of the company has scaled very well, it has scaled through a number of different routines that I think we maintain. I still do, for example, that culture presentation, the culture deck. It’s something that I have presented to the 2700 people that have started on Nubank. Every month I present those values, I present those cultures, my way to permit to introduce myself to the new Nubankers, as we call them. We have our all-hands meeting continuously every two weeks, and, anyway, we have a number of different routines that maintain that culture a healthy and that allow us to figure out what is working well and what might not be working well.

Miguel Armaza 15:54

That makes sense. And how has this culture fared in light of the current pandemic?

David Velez 16:01

The culture has overperformed anything I would have imagined. We have an engagement survey that we send to all our employees several times per year. Through the pandemic, we’ve sent it almost every week to sub-segments of different people of Nubank. And we’ve always had really high engagement. We’ve always had, from zero to 100, across a number of questions where we ask people do you recommend working for Nubank? Are you happy to come to work? How engaged are you? How motivated you are? We’ve always hovered since the beginning of the company at something like 85 to 88. Over the past few weeks, we’ve reached the highest levels we’ve seen since the beginning of Nubank. We’ve seen levels of 93 and 94 percentage of engagement. And I think the reason why that’s been the case is because the pandemic has allowed us to really test a lot of those values and show that they are being authentic. So for example, as I mentioned before, our first value is having a customer focus. In times of crisis, that’s really when you’re able to show that whether what you say is real or if it’s just something pretty that you put on the wall for people to look at. One of the very first things that we did during the pandemic was to set up a 20 million reais fund to help our customers in anything they needed. From, obviously, refinancing their debts, interest rates as low as 80–85% discount of interest rates, to refinancing a lot of the debts, to providing free telemedicine service to customers that couldn’t afford going to a doctor. To providing free food for customers that actually didn’t have food to eat. We sent diapers and milk to customers that didn’t have money to provide for their babies. We did partnerships with startups that provided anxiety support or psychological support. So the crisis gave us an opportunity to really put these values of customer centricity to the test. It also allowed us to put the values of taking care of our employees really well. Very early on, we were one of the first companies that decided to send everybody to work home remotely in Brazil. Over the course of 24 hours, we sent everybody to work from home. And we had great infrastructure that allows to maintain that remote. But we went beyond and we were very focused on making sure that people were productive and people were safe at home. Just to give you some examples, we sent over 1000 ergonomic chairs to people’s houses, because people didn’t know and they were working on their beds all day, eight hours, they couldn’t be productive. They couldn’t feel well. We sent over 1000 monitors and keyboards and mouses to people’s houses. So those details just really showed our employees that we really care about them. We were one of the few startups that didn’t do any layoffs. We were in a really great financial situation and we made sure that the people were in good standing so they were well taken care of. So the pandemic kind of created this situation where we always say crises are the moments where your values are really tested. And I think we saw that as an internal test to show integrity, to show that what we said that we were doing, was what we were going to do. And since we did that, people’s motivation and engagement increased to the levels that I mentioned to you.

Miguel Armaza 19:26

Definitely a major challenge not just for Nubank, but for the industry as a whole. How do you envision the new normal going forward? How are we going to approach the post-pandemic world?

David Velez 19:41

So I think the post-pandemic world accelerates the acceleration of a number of different trends that are happening all across industries and companies and even economic models. So the easy, obviously, the ones are digitalization of all the industries from financial services, to education, to media. All the industries that were digitizing, this shock accelerates that acceleration. So those are sort of the most obvious trends. Another trend that was happening was the trend around remote working. A lot of companies, especially startups, were getting slowly more comfortable with remote. We’ve been in Brazil and one of the challenges that we’ve always seen to grow was shared technical talent. And that had forced us already to have offices outside Latin America. A few years ago we opened and we opened an office in Berlin, in Germany. We had an office in Buenos Aires. But we were still sort of not fully convinced about being remote work. We thought we needed an actual physical space to bring that talent. The pandemic has made us fully comfortable being fully remote. I don’t think we’ll go to a hundred percent, although some teams might actually be hundred percent remote, but fundamentally that just changes our mind about being comfortable having teams remote and this means now our pool of talent is the world. It’s not Brazil. It’s not Latin America, it is the world. Today, we already have people in over 50 countries working for Nubank. Furthermore, we have people in the Middle East, we have people in India, we have people in Europe and almost every time zone in the US. So I think that just kind of accelerates. And one trend that I also like to talk about that gets accelerated that is maybe less obvious, I also think is the role of companies in society. Before the pandemic, you started to hear a lot about conscious capitalism, about companies thinking about their different stakeholders. And as I mentioned, now, the pandemic really forced companies to show integrity and to take care of their customers, their people, their communities. A lot of companies have used this crisis to show that they really care about their community. In our case, what we do for customers, what we’ve done for employees is the way for us to really see that redefined nature of a company. I think the post-pandemic world will have companies embracing a much broader view of capitalism. Of taking care of their societies taking care of their environment. Taking care of their people. So, in a way, the pandemic doesn’t necessarily, I don’t think it creates new trends, it really just accelerates trends of behaviors of the society of economic models and behaviors.

Miguel Armaza 22:28

That’s fascinating. Speaking a little bit on the business front, we’re talking a day after a major announcement, which is this partnership that you have launched with Facebook and WhatsApp where in Brazil, users of WhatsApp will now be able to send payments through the platform. Can you talk a little bit about this partnership?

David Velez 22:49

Sure. So one of the ambitions of Nubank since the very beginning has been to increase- not only to bank the banked consumers better and cheaper and faster. Latin America has about 400 million customers that have banking access, but today pay some of the highest banking costs in the world. In Brazil, as I mentioned, interest rates and credit cards and loans go up to 400/500/600% a year. But in Brazil. the Brazilian banking oligopoly charges some of the highest fees in the world. If you look at Mexico it’s the same, it’s an oligopoly of banks. Colombia, Argentina, Peru- the banking industry, which is also one of the biggest industries in Latin America, it’s an industry of oligopolies. There hasn’t really been competition in decades. So, part of our ambition since the beginning was to bring competition to this industry, and decrease the cost of banking for all these bank consumers. But part of also the ambition has been so there's over 250 million Latin Americans that have no access to banks because banks in a world of oligopolies in a world of offline branches, they have no interest in opening a bank account for somebody that will deposit $50 or that will get a $50 loan. It’s completely uneconomical. So there is a third of the population that has been marginalized in Latin America and part of our intention and ambition is to also bank and formalize a third of that population. So when we think about what are the platforms today that have access to 90% of the Latin American population, the most popular of those is WhatsApp. WhatsApp is the most pervasive piece of technology today in Latin America, maybe even in emerging markets. And so, with that, we’ve always thought for a number of years that there was a lot of complementarity between what WhatsApp could bring and what Nubank could bring. WhatsApp brings that access, but they don’t have banking licenses, they’re not in the banking business. What we bring is a real understanding of banking, is using a lot of internally developed technology, credit underwriting algorithms, to be able to expand banking services to the entire population. So we think it’s a very complementary relationship and we’re very happy to, after a number of years of discussing with Facebook and WhatsApp on this, to be able to finally launch this yesterday for Brazil and we think it’s just going to be a game-changing partnership for the Brazilian consumer. It’s really going to help us accelerate those trends that I was mentioning. Decrease the cost of banking and banking the unbanked.

Miguel Armaza 25:32

Fantastic. Fantastic. Well, before we go, David, one last question. How has the ecosystem in Latin America evolved? The entrepreneurial ecosystem that is. And how do you envision it going forward?

David Velez 25:46

It has changed significantly since I mentioned in 2012 when I was with Sequoia and we came to terms with that sad realization. Today is a way more active ecosystem. If you look at the biggest Latin American startups, they’re really finally solving problems that Latin Americans have. They’re not doing the copycat thing. Which is great, because if there’s one truth for Latin Americans is we are full of problems. I always say, just leave your house in any City. In Bogota, Mexico City, Buenos Aires, and go into urban transportation or go to a hospital or go to a university or get a bank account. The amount of friction points of underserved markets of underserved consumers is gigantic. The amount of entrepreneurship opportunities in Latin America is huge. So it was sad to see that a lot of the early Latin American startups were very much focused on solving the problem of the Silicon Valley engineer. So finally, I think we’ve done that bridge. Latin American entrepreneurs are now solving the real problems that need to be solved for Latin America. And so we’re in way better shape. I still think, though, that there’s an opportunity to take an even bigger leapfrog. And what’s still happening is there still massive undersupply of technical talent in the region. Today, I was looking at these numbers, in Bogota or Sao Paolo, more people graduated from computer science in 2000 than in 2020. There are fewer engineers being graduated in Sao Paulo today than 20 years ago. That is absolutely crazy. There are still 2X more lawyers graduating in Bogota today than engineers. So something’s still missing fundamentally and people actually students or the population are realizing that the future of Latin America is technology. But something still has to shift. I think it probably will take a while. Part of what needs to happen is, we need Nubank to be successful, but we also need 20 more Nubanks or other startups to be successful so that people start realizing and seeing that technology is the next wave of companies and that technical talent is the key raw material. I think that’s what’s really missing. But I’m very hopeful and I’m very optimistic about the trends and so I think we just sort of need to continue pushing hard and seeing a lot of these trends develop.

Miguel Armaza 28:14

Fascinating. Well, David, thank you very much again for joining us. it’s been a treat and we look forward to having you sometime around campus as well.

David Velez 28:24

It will be my pleasure, Miguel. Thanks a lot. Great talking to you!




🎙Co-President/Podcast Host @WhartonFintech. Fintech investor @ Gilgamesh. 📚MBA/MA Candidate @Wharton/@LauderInstitute. Author of Fintech Leaders Newsletter✍️

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Miguel Armaza

Miguel Armaza

🎙Co-President/Podcast Host @WhartonFintech. Fintech investor @ Gilgamesh. 📚MBA/MA Candidate @Wharton/@LauderInstitute. Author of Fintech Leaders Newsletter✍️

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