Weekly Reads - September 4, 2023
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Nu Bank’s launch of personal loans in Mexican continues the company’s quest of dominating financial services in Latin America by lowering barriers for lower income consumers.
Nu Bank has launched personal loan services in Mexico aiming to grow its financial services portfolio in Latin America’s second-largest economy. This new product will allow customers to get personal loans in less than 5 minutes through the company’s digital app. Launching personal loans was an obvious follow-up to Nu Bank’s launch of saving accounts in Mexico which hit one million users after a month of its launch. Around 20%of the adult population that has smartphones have already applied to at least one Nu product so there is obvious cross-sell potential with the launch of new products like personal loans. The quick adoption of its products by the Mexican adult population and record revenue of $1.9 billion in the second quarter this year is pushing Nu to roll out products at a faster pace. Nu is following the same playbook as Brazil by launching early with a credit/debit card product gaining wide adoption before following up with traditional banking services like savings accounts and personal loans. As a 100% digital bank Nu does not have the added costs of managing physical branches so they can undercut traditional banks while providing a faster more seamless banking experience. Like Brazil, as Nu builds out its product portfolio in Mexico customer spending and retention will grow over time as customers increase the number of products they use since they already use Nu for their savings account. With the lowest cost to serve and the best-in-class digital experience, Nu has a competitive edge over traditional banks in Mexico which have built their business model on high-income consumers and invested heavily in a physical branch network.
The Disney and Charter dispute is non-constructive with both companies likely to lose out in the short to medium term if they can’t come to a quick agreement.
College football fans were in for a shock last weekend when they were denied access to their favorite teams after a dispute between Charter and Disney led to a blackout of popular Disney-owned channels. Charter and Disney have been in the midst of a negotiation to get Disney-owned content back on Charter but have not reached an agreement with both companies citing the other as the culprit. Charter’s CEO Chris Winfrey has claimed the Pay TV model is broken and sees a negotiation with Disney as a way to give customers more choice and access to Disney ad-supported streaming services like Disney+ and ESPN+ at no additional cost. Disney has resisted changing the current model even with Charter agreeing to higher fees. Both companies are likely big losers if this situation continues with 25% of Charter’s customers interacting with Disney content and Charter being a large profitable customer for Disney which has struggled to make its streaming service profitable. Charter is paying $2.2 billion annually to Disney for access to its content making this relationship extremely important for both companies. Live sports remain the glue that holds Pay TV together and Charter remains an extremely profitable channel for Disney to leverage whether it’s to subsidize Disney+ or in a potential sale of their linear TV business. With Pay TV slowly dying it will be interesting to see how far Charter pushes Disney to make concessions to improve the Pay TV model in the new world of streaming.
Europe’s target of all-electric vehicles sales by 2030 might be in jeopardy with Mercedes indicating that they will continue to make whatever type vehicles customers are demanding keeping tactical flexibility in an uncertain world.
In a recent interview at the Munich car show, Mercedes clarified that they don’t see 100% EV sales all across Europe by 2030. The company said that they were targeting all-electric sales in markets that would allow it but ultimately what they produce will be up to what customers want. Mercedes is extremely skeptical that Europe’s current infrastructure is ready to support the transition to EVs and will keep tactical flexibility in the meantime. Despite 55% growth in EVs in the first seven months of 2023 EVs only make up about 13% of all car sales. BMW’s CEO has expressed that there could be a possibility that European lawmakers might be pushing back the EU’s 2035 ban on fossil fuel-emitting vehicles when they go to review that target date in 2026. Auto executives have spoken out on EVs due to barriers to producing and selling EVs on a larger scale at competitive prices due to high electricity costs and lack of charging infrastructure throughout Europe. As we have seen in recent months, EV prices have plummeted pushing traditional automakers to take larger losses on their EVs. At this point in time, the EV slice of the market is far too small for all large automakers to produce at the scale needed to generate the same profitability as ICE vehicles. Headwinds such as rising electricity costs and the lack of EV infrastructure could dampen demand slowing EV adoption on the consumer side which won’t incentivize automakers to fully transition over to EVs. There is no doubt that eventually the world will transition to EVs but current targets might be too aggressive with many regions lacking the infrastructure in place to support an exponential ramp-up of EVs on the road.