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- Makes 500 million investment in Nubank in Brazil with 40 million consumer base
- Warren puts his money in virual banks
- Disinvests from large financial institutions
Warren Buffett’s Berkshire Hathaway has just made a 500 million investment in Brazilian digital bank, Mubank. The announcement was made by Nubank recently and said that the Warren Buffett’s Berkshire Hathaway funding is an offshoot of the G Series funding, which was carried out in January. Series G was the eighth in a series of the fundraising campaign.
500 million investment in Nubank in Brazil
Digital Bank Nubank is one of the largest banks in Latin America and has a base of 40 million customers. The digital bank is growing at a fantastic pace and is adding more than 45,000 new customers per day in the first half of 2021. The Brazilian digital bank has been crowned as one of the most influential banks in Latin America by Time magazine and one of the most significant by CNBC.
Big Banks are on the defensive
Big Banks are on the defensive after the onslaught of Digital Currencies. However, they continue to hold fast on large-scale credits. Buffet was an avowed critic of Bitcoin and other digital tokens until last year. He was also a die-hard shareholder of big US banks. However, of late, his faith in the traditional finance sector seems to have eroded.This has culminated with the 500 million investment in
Early this week, Berkshire Hathaway invested $500 million in Brazil’s Nubank. It was the most significant investment by the fintech company and took its valuation to $30 billion. Buffet for decades invested in financial institutions. His interests spanned across lenderslen, insurers, and credit card companies.
Divests from traditional financial institutions
However, in 2020, he dumped 84 % of Berkshire Hathaway Inc holdings in Goldman Sachs Group Inc. Warren had picked during the decade’s global financial crisis. He pared stakes in JPMorgan Chase & Co. and Wells Fargo & Co. By the end of 2020, Berkshire Hathaway Inc.’s portfolio share in financial firms had come down to 23.6%, down from 41% in 2019.
Concentrating on banks with digital-only transactions
The latest move by Berkshire Hathaway to make 500 million investment in Brazil’s digital bank Nubank has been watched with trepidation by watchers who are trying to solve the puzzle of Warren Buffett’s actions. Earlier, Warren Buffett had compared the present COVID-19 pandemic situation to that of 2008 when large sections of the society were jobless. It is unclear if Buffet is finally switching from traditional financial institutions like banks into digital bank that are more adept at digital-only transactions.
Buffet has invested in StoneCo Ltd and Paytm of India
Experts say that the truth could be somewhere in between. Warren Buffet digital banks pushcould be a wise move based on the growth potential and driven by consumer choice. Berkshire already has a 4% share in Brazil’s payment firm StoneCo Ltd. Buffet is putting his money on disturbances in the market and not on efficient money producers with diminishing returns. In the end, it is the consumer who benefits most from techno disturbances.
Virual Banks are more popular
Virtual banks have accomplished with ease what traditional financial institutions and banks have toiled to achieve for years. Consumers have been drawn to virtual banks because of low operating costs since such banks do not require expensive infrastructures like offices and physical assets.
Slow Transition to digital stage by traditional financial institutions
The financial institutions in which Buffet has reduced his shares are also trying to create their consumer-oriented digital units. However, this transition is painfully slow and expensive. Goldman’s Marcus, JPMorgan all are moving towards the digital push, and the pains are already being felt.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
