Fintech & The Implausibility of Profit

It’s often said that investing in financial institutions is a bit like trying to predict the migratory patterns of particularly stubborn dust bunnies. Just when you think you’ve got a handle on things, interest rates do something unexpectedly dramatic, and suddenly everything is swirling in a completely different direction. Traditional banks, bless their cotton socks, are currently facing a situation where earning interest on loans is becoming increasingly…challenging. It’s a bit like trying to fill a bathtub with a thimble, really. And fewer savers means less free money sloshing around for them to play with. The gap between what they earn and what they pay out is, shall we say, narrowing with alarming speed.

However, there’s a curious phenomenon unfolding. A new breed of financial entity – the fintech companies – are attempting to disrupt this established order. They’re offering a bewildering array of digital banking services, attracting customers with the promise of convenience and, occasionally, actual innovation. (It’s worth noting that the definition of “innovation” in the financial sector often involves simply putting something online. A truly revolutionary concept, that.) These companies, rather than being weighed down by decades of tradition and physical infrastructure, are…nimble. Like particularly motivated digital badgers. Let’s examine two of them – SoFi and Nu – and consider the rather improbable possibility that a thousand dollars invested today might, just might, blossom into something considerably larger over the next decade.

SoFi

SoFi, founded in 2011, began its life as a student loan provider. A noble, if slightly terrifying, undertaking. It has since evolved, or perhaps metastasized, into a “one-stop shop” for pretty much anything financial. Auto loans, mortgages, personal loans, credit cards, insurance, even the ability to dabble in the volatile world of cryptocurrency. (A decision that, statistically speaking, will likely result in a mild sense of regret.) They even acquired a digital payment processing company called Galileo in 2020, and obtained a U.S. bank charter in 2022. A charter, you understand, is a sort of official permission slip from the authorities, allowing them to engage in the time-honored tradition of moving money around.

SoFi’s digital-native approach has allowed it to expand at a rate that would make a particularly enthusiastic amoeba blush. It has attracted a significant number of Millennials and Gen Z customers – those digital natives who view physical bank branches with the same suspicion as a medieval peasant might view a spaceship. By the third quarter of 2025, they’d grown to 12.6 million members, wielding a collective 18.6 million products. Galileo, operating somewhat independently, hosts nearly 160 million accounts. (Which is a truly staggering number of accounts. Imagine trying to remember all those passwords. It’s enough to make one question the very nature of reality.)

SoFi’s expansion hasn’t been entirely smooth sailing, of course. A temporary freeze on student loan payments and rising interest rates did throw a bit of a spanner in the works. However, those headwinds are now dissipating, and they’re rolling out more fee-based services. A clever move, really. It’s like deciding to sell umbrellas during a hurricane – ethically questionable, perhaps, but undeniably profitable.

Analysts predict that SoFi’s revenue and adjusted EBITDA will grow at a CAGR of 23% and 38%, respectively, from 2025 to 2027. With an enterprise value of $31.5 billion, it appears reasonably valued at 19 times this year’s adjusted EBITDA. (Though, of course, valuation is a notoriously unreliable art form. It’s a bit like trying to measure the weight of a dream.)

Nu Holdings

Nu, founded in 2013, owns NuBank – the leading direct bank in Latin America. Like SoFi, Nu has managed to bypass the traditional brick-and-mortar model, attracting a younger clientele. (It’s worth noting that the appeal of not having to actually go to a bank is surprisingly strong.) A significant portion of Latin America’s adult population was previously unbanked, and NuBank convinced many of them to abandon the old ways in favor of its online platform. (A feat of marketing genius, or perhaps just a recognition that convenience trumps tradition.)

From the end of 2021 to the third quarter of 2025, NuBank’s customer base more than doubled, from 53.9 million to 127.0 million. Their activity rate (the ratio of active customers to total customers) expanded from 76% to 83%. They launched more lending services, integrated e-commerce services, and even dabbled in cryptocurrency trading. (A decision that, statistically speaking, will likely result in a mild sense of regret. It’s a pattern, you see.)

Nu’s three largest markets are Brazil, Mexico, and Colombia. They haven’t yet expanded into other smaller Latin American markets, but they’ve recently applied for a U.S. bank charter. (A move that could potentially pave the way for a full-scale invasion of the American financial landscape. Or, you know, just a bit of healthy competition.)

Analysts expect Nu’s revenue and earnings per share to grow at a CAGR of 30% and 37%, respectively, from 2025 to 2027. Nu’s stock might not seem like a bargain at 46 times this year’s earnings, but it could still have plenty of upside potential. (Though, of course, predicting the future is a notoriously unreliable art form. It’s a bit like trying to herd cats.)

According to IMARC Group, Latin America’s fintech market will expand at a CAGR of 15.1% from 2026 to 2034 as income levels and internet penetration rates rise. As an early mover in that growing market, Nu could still gain tens of millions of new users over the next decade. (Which, statistically speaking, is a rather impressive number of users. One can only imagine the amount of data they’ll be collecting.)

2026-01-16 22:13

SoFi

Nu Holdings

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