Warren Buffett, until last year a devoted shareholder of big U.S. banks, has moved on to their challengers. Does that spell the end of his faith in the traditional financial sector?
This week, Berkshire Hathaway Inc. poured $500 million into Brazil’s Nubank — the fintech company’s
For decades, financial institutions were Buffett’s bread and butter, with stakes in lenders, insurers and credit-card companies. That changed last year, when Berkshire
Berkshire watchers were shocked and worried as they tried to decipher Buffett’s moves. He compared the coronavirus crisis to 2008, noting there were a lot of unknowns given large swaths of society were shut down.
Merrill Lynch, Ameriprise Financial and Hightower Advisors are on the list for the 2021 Digital Wealth Management Impact Innovation Awards.
Now it’s worth asking whether Buffett is going a step further with this Nubank stake — and whether this is a deliberate switch from the old and entrenched world of finance to the new, digital-only variety. Customers certainly don't need brick-and-mortar branches in the middle of a pandemic.
The reality may lie somewhere in the middle. Buffett’s fintech bet is less a testament to his beliefs about the future of banking than a hunt for standout growth potential, driven by consumers. Berkshire already owns a stake of around 4% in another Brazilian payments firm, StoneCo, and
Virtual banks seem to have accomplished what incumbents have had a much harder time pulling off. Their ease of use and accessibility

It’s true that Berkshire could have made its digital plays closer to home and in theoretically safer markets. In places like Europe and the U.S, however, the neobank space is relatively mature with limited investment upside, given all the venture capital money that’s already crowded in. In the first quarter alone,
Meanwhile, U.S. and European regulators are becoming more cautious (think Germany’s
No wonder Buffet is looking elsewhere. Emerging markets like Latin America and Asia, where consumers have helped payments and digital money systems take off, present a long-term opportunity. Lenders in these regions are inefficient, expensive and relatively weaker — often saddled with bad loans. The number of unbanked people remains vast and, outside China, regulation isn’t a huge hindrance yet. The future of fintech has already shown clear success and uptake. Ride-hailers and e-commerce businesses have become super-apps and are getting banking licenses.
Brazil’s Nubank competes with the big lenders in terms of volumes. It had more than 57 million downloads, while annualized revenue between 2017 and 2020 grew over 100%, according to Goldman Sachs analysts. Its
So while big banks appear to be on the defensive, they continue to hold the reins to large-scale credit, as costly as that is. Their digital friends, however, will have a much more lucrative path up. Buffett knows that.