Brazil’s regulators have told the country’s largest fintech Nubank that it cannot keep using the “bank” label in its branding inside the country because the company does not have a banking license, and the new rule that took effect in November blocks any firm without that license from calling itself a bank.
This move landed on the largest fintech in Brazil at a time when it serves 110 million customers, and its valuation of more than $80 billion sits above every licensed bank in the country.
The decision was created to stop people from thinking they are putting their money into a licensed bank when they are not.
Nubank now needs a quick way out of this. Instead of spending years going through the country’s full licensing process, the company is trying to buy a smaller licensed bank.
A person familiar with those discussions allegedly said Nubank is evaluating banks that already hold the local license and may even have accumulated losses, since those losses could bring tax benefits after an acquisition.
That person also said that Banco Digimais SA is one of the firms examined so far. Nubank has not settled on any final decision and could still file for its own license if the search turns into a dead end. Buying a bank would avoid the long wait and high costs tied to the license process.
Brazil tightens rules to limit confusion and curb loopholes
The central bank made this change because it wants to close gaps in the system that have allowed confusion and fraud to spread.
Nubank, founded in 2013, grew under a friendly regulatory setup that let payments companies issue credit cards and hold accounts without being full banks. That setup worked for growth and competition, especially in a system once dominated by a small group of big banks.
But it also produced weak spots that smaller players abused. Some of those players had ties to organized crime, and the authorities said the loopholes had to be closed.
Earlier this year, the central bank raised minimum capital requirements for fintechs to prevent weaker companies from slipping through the cracks. Those changes do not hit large fintechs like Nubank, but regulators did raise the level of oversight for Nubank itself, placing it under rules similar to what midsize banks face.
David Vélez, the company’s chief executive, said this week that getting a license “shouldn’t be a burden from a regulatory point of view.”
As Brazil’s fintech sector expanded, criminal networks found ways to exploit the fast-moving space. That concern was made clear in August, when Robinson Barreirinhas, the head of Brazil’s federal revenue service, said fintech companies help criminals “move, conceal and launder illicit money,” and he warned that these networks now use “more sophisticated vehicles such as investment funds.”
His warning followed a rise in fraud cases that have hit both fintechs and banks in recent months.
Fintech boom stretches regulators as criminal networks exploit gaps
Executives at banks, fintechs and industry groups had said that fraud has become one of the most expensive problems in the country’s financial system. The impact is felt through higher costs, weaker competition and a drop in consumer trust.
Brazil recorded 1,592 fintechs in 2024, which makes up almost 60% of all fintechs in Latin America, based on a study by the Esfera Institute using data from consultancy Distrito. But only 334 of those companies were regulated by the central bank as of March, leaving most of the sector outside strict oversight.
The rise of digital assets brought more access and more competition, but it also created room for criminal groups to move money through less supervised channels.
Regulators, public security agencies and even the fintechs themselves have not kept up with the speed of that expansion, and the lack of oversight created large gray areas where illegal networks gained traction.
Brazil’s Justice Ministry has made it clear that the fight now centers on cutting off money flows in the financial system.
Mario Luiz Sarrubbo, Brazil’s national secretary for public security, said dismantling the cash pipelines of these groups through targeted action on money laundering is now a key part of the push against organized crime.
