00:00You know, we've been talking about all the risks.
00:02We're talking about all the concerns of the markets,
00:04if yes, if perhaps valuations are so high.
00:07What's the key takeaway here from all the angst
00:09and the edge that investors are feeling?
00:12Certainly, there's a sense of frothiness and investing,
00:16specifically driven by everything that's happening in AI.
00:19But nobody really knows,
00:20because this is such a fundamental different technology
00:23that is changing all markets and all sectors.
00:26It's a revolution.
00:27It's similar to the Industrial Revolution.
00:29It's a revolution similar to the Internet Revolution.
00:31There is certainly frothiness in some areas.
00:33There are some companies that are going to succeed.
00:35There are some companies that are not going to succeed.
00:36So I think right now we look at all this volatility
00:39and it's hard to really know what's going to work out
00:41and what's not.
00:42But the trend is very powerful.
00:44And so ultimately, I think for companies like us,
00:46you have to invest behind.
00:47You have to continue operating, continue moving forward,
00:50be on the low cut for risk.
00:51There is a lot of risk,
00:53but there's a lot of opportunity coming in with that risk.
00:56Where are the opportunities?
00:57How are you investing?
00:58Where are you investing?
00:59In our situation, we see financial services globally.
01:03Financial services is still the single largest profit pool
01:06in the world from an industry
01:08that hasn't really been reinvented.
01:10If you look at financial services today,
01:1290% of it is still dominated by the big incumbent banks
01:15that have controlled this industry for decades.
01:19And all industries have been reinvented by technology.
01:22Financial services still hasn't.
01:24So our thesis in 2013 when we began is that the future of financial services
01:28is for consumer-obsessed digital banks.
01:32We began with that thesis in Latin America, Brazil, Mexico, and Colombia.
01:35We think over the next 10, 20 years,
01:37the leading financial services companies in the world
01:39are going to be fully digital banks, technology companies.
01:42And that is the opportunity.
01:44And some of the trends like AI will only be enablers of that growth.
01:47And yet your focus has been Latin America.
01:50I mean, if you take a look at Southeast Asia,
01:52Asia as a whole, a billion people in India.
01:55Why are you not here in a bigger way?
01:58Well, we have to focus a little bit.
02:00And Brazil, Mexico, Colombia, Latin America is a 650 million population.
02:05That's where we began.
02:06That's where we saw the big banking concentration.
02:09About five banks own 85% of the assets in Brazil, in Mexico, Colombia.
02:13Actually, not that different from Southeast Asia or from Africa.
02:16You see a lot of similarities across all of these different countries.
02:20Eventually, I think we're going to be able to see this trend,
02:23this thesis playing out in different parts around the world.
02:25We made an investment in a company called Time,
02:28which is one of the leading digital banks in South Africa and the Philippines.
02:31And that's one way for us to start getting smarter about the opportunities that Southeast Asia has.
02:36But for now, we're kind of focusing slowly in expanding this model.
02:41What have you seen so far from that investment in time?
02:44And are you intending to replicate it elsewhere in Southeast Asia?
02:49So we've seen a lot of similarities actually with Latin America.
02:52Basically, you've seen a lot of these countries around the world.
02:54You have a bank population that is being served by big incumbent banks,
02:59generally oligopolies, five, six banks owning the majority of the financial services space.
03:04Whenever you see oligopolies, you're going to see lack of access.
03:07You're going to see very high fees, interest rates, poor service.
03:10So for that bank customer, a fully digital banking model can provide better products at lower cost.
03:16Our cost structure enables us to serve at a much lower cost.
03:20And so for the bank population, you can serve a better product.
03:24Then you have the large unbanked population.
03:26In Latin America, over 250 million people have no access to banking.
03:30Around the world, something like three, four billion people have still no access to banking.
03:34You need a very efficient model to get to that.
03:36And that's the digital banking model.
03:38So we actually see a lot of similarities between a country like the Philippines or Mexico or Brazil.
03:44I've seen a model that can provide a product for both banked and unbanked could be the winning model over a 10, 20-year horizon.
03:51These are models that are very local in nature.
03:53It's very regulated.
03:54You need licenses.
03:55So it's harder to internationalize.
03:57But if you have a model and a playbook that start working, you can actually do it.
04:01What is the strategy?
04:02If you take a look at Southeast Asia, I think it's the same in Latin America, where there's still a huge potential because there's a lot of people who are still underbanked, unbanked.
04:11Yet there's certain pockets of the sector, which is already kind of close to saturation.
04:16How do you balance that?
04:17How do you square that?
04:18Yeah.
04:19So, yeah, you have the bank customers that are very well served, but they're paying very high.
04:23A lot of them are paying extremely high fees because they're ultimately funding a physical banking infrastructure that is very costly.
04:30People are still paying for banking branches that they actually don't want to use.
04:35And being banks maintain those banking branches.
04:37For the majority of financial services, you don't need all that banking infrastructure, right?
04:41It's a little bit like the Blockbuster when you used to go to Blockbuster to get a VHS and then suddenly Netflix came.
04:47The same thing is happening in financial services.
04:49But then, yeah, the opportunities in our 4 billion customers around the world that have no access to banking services, they have no access to credit.
04:55So, digital banking infrastructure and credit capabilities will enable to bring 3, 4 billion people to the global economy.
05:03We'll be able to create huge formalization around the world.
05:06And that's one of the biggest opportunities that we see.
05:08It requires a lot of capabilities, data to be able to do credit for customers that have been unbanked.
05:14It requires a lot of patience, a lot of infrastructure.
05:16But we've been able to show that, at least in Latin America so far, that there is a model here that can be replicated very effectively.
05:25Speaking of credit, it gives me a good segue to private credit.
05:28We heard from Jamie Dimon, of course, talking about concerns in the private credit space.
05:32When it is a $3 trillion market, any signs of, I guess, an unwinding is a great concern?
05:41Or is that overblown, you think?
05:43I think it's hard to say.
05:44I wouldn't have a very strong point of view.
05:46It's a very large market.
05:47There is some frothiness in the private sector market.
05:50Just some?
05:51There is some, but it's also a very large market.
05:54So, ultimately, it's hard to know exactly how much it is.
05:57Ultimately, though, investors are investing in these assets and they are expected to do their own due diligence.
06:02So, it is always a little risky when it's completely unregulated, when it's not an area that really has regulators forcing certain disclosures.
06:13But these are very sophisticated investors that are making these investments ultimately.
06:17So, I'm sure there will be bad investments in that area.
06:20There will be good investments in the area and we'll see ultimately where that lies.
06:23Of course, retail money is increasingly getting into the private space as well.
06:27Therein lies the issue.
06:28That's right, yeah.
06:29In our case, we're fully regulated, we have banking licenses, we provide credit, but we always operate it in the fully regulated aspect of the industry.
06:37There are benefits and costs to that, but ultimately for model nexus and absence.
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