Brazilian unicorn startup Neon raises $80M in a quest to become the biggest bank for Brazil’s working class

A recent survey by the Locomotiva Institute found that 34 million Brazilians do not have access to banking services. Of this number, 6.3 million Brazilians do not have a bank account, while the remaining 17.7 million are underbanked.

That was not all, Brazilians with bank accounts also faced poor service and high costs associated with traditional banking in the country. It was this frustration that led Pedro Conrade to address this problem with the launch of a digital bank that provides affordable and accessible financial services.

In 2016, when he was a 23-year-old business school student, Conrade founded Neon, a challenger bank focused on improving the lives of working Brazilians. The launch was a resounding success. Fast forward six years later, Neon now has 15 million registered accounts.

Just last week, Neon raised $80 million in its first Credit Rights Investment Fund (FIDC) focused on credit cards. This investment increases the total fund to $170 million US in equity, and it is expected to nearly double.

“The funding endorses the strength and positive history that we have been building in the management of the credit portfolio over the last few years. Today our credit engine is mature and the FIDC resources will give us the strength to continue expanding our portfolio in a sustainable and balanced way in the med-long term. The focus continues to be on the Brazilian worker, and always with the mission to reduce inequalities by building paths to credit,” says Jamil Marques, CFO of Neon.

This is the second fundraising made by Neon in the private credit market this year, given that it had already raised just over US$ 40 million for its private payroll deductible FIDC at the beginning of 2022. The management of the FIDC focused on credit cards was attributed to Empírica, asset management with 12+ years of experience in the market, focused on structured credit and a portfolio of 50+ funds and over US$ 1.5 billion in assets under custodial.

“We are excited about this partnership that began in the first months of the year as a one-off investment in another Neon FIDC, focused on private payroll loans. Based on this good experience, we expanded our relationship to take over the management of the credit card fund. The intention is to bring more comfort and security to investors, including ourselves who, via funds of funds managed by us, contributed a total of $20 million US to FIDC Neon. This shows an alignment of interests with the other investors in this fund,” says Giuliano Longo, Managing Partner of Business Expansion at Empírica, adding that the check may increase as the FIDC grows. In addition to Empírica, XP, and BV also led investments in the FIDC.

Neon believes it can create a conscious path to credit with solutions and innovations that can help the customer to obtain credit in a simple and fair way. Neon recently launched the elastic limit, which makes it possible to expand credit for one-off purchases, based on credit assessment. Additionally, the company already offers personal loans, payroll loans, and credit cards without annuity with special conditions. Neon plans to launch new solutions that will help its customers consciously access credit throughout the rest of the year.

Neon ended 2021 with a total credit portfolio of US$ 270 billion and the idea is that the FIDC will bring greater flexibility to its growth strategy. The fintech expects to maintain a sustainable expansion of its credit portfolio, which should more than double by the end of 2022. Neon currently has more than 15 million customers.

Neon is a Brazilian fintech founded in 2016 whose mission is to unite technology and design to redesign and simplify people’s financial experience, reduce inequalities, showing simpler and fairer financial paths. With more than 15 million customers, including individuals and companies, Neon recently achieved a valuation of $1.6 billion after its series D fundraise, in which the Spanish Bank BBVA invested $300M.

Neon’s rapid expansion has been made possible in part by strategic acquisitions such as MEI Fácil, which offers financial services and education to individual micro-entrepreneurs, in 2019; and the purchase of Magliano Invest, which was the first stock brokerage on Bovespa – the Brazil Stock Exchange Index, in 2020. In the same year, Neon strengthened its payroll loan portfolio with the purchase of ConsigaMais+, the main company in the sector, and with the recent acquisition of Biorc, a company that has the license of Credit, Finance and Investment Society (SCFI).