Neobanks in emerging markets: a risk assessment

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Neobanks have risen as popular digital challengers to incumbent banks, especially in emerging markets (EMs) where the banking sector is often characterized by oligopolies. This article first estimates the value of Nubank and StoneCo in Brazil, two of the fastest-growing neobanks in Brazil. Normalizing revenue growth assumptions from their financial data, valuation models uncover that Nubank could be overvalued by about two times, whereas StoneCo could be undervalued by 80% of its fair value, as of March 19, 2024. This article then discusses firm-specific (high cumulative net operating losses, low long-term operating margins, high borrowing costs) and adherent macroeconomic (political uncertainty, foreign exchange risks, high equity risk premia) risks in EMs that explain the volatility in Nubank’s and StoneCo’s stock prices. These risks are instructive for understanding the challenges facing the business model of neobanks in EMs.

Original languageEnglish
Article number655
JournalHumanities and Social Sciences Communications
Issue number1
Publication statusPublished - Dec 2024

ASJC Scopus subject areas

  • General Business,Management and Accounting
  • General Arts and Humanities
  • General Social Sciences
  • General Psychology
  • General Economics,Econometrics and Finance


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