Should Nubank raise credit limits for existing cardholders or approve more new customers?

Introduction

The purple Nubank credit card made Nubank famous in Brazil, and credit remains its largest revenue engine. Every quarter, Nubank's credit and product teams decide how to use a limited "risk budget": the amount of credit exposure and expected losses the company is willing to take. Two uses compete for it. Raising limits for existing cardholders rewards customers who have shown good behaviour, increases spending and deepens loyalty. Approving more new applicants grows the customer base, which feeds Nubank's long-term flywheel of cross-selling accounts, investments, insurance and loans.

The question: should Nubank raise credit limits for existing cardholders or approve more new customers? I'll treat it as a structured trade-off with data, experiments and a decision rule.

Step 1

Clarifying Questions (3 minutes)

• Context: is there a fixed risk budget for the next quarter? I'll assume a fixed budget of expected credit losses and capital, which can be spent on either option.

• Business: what is the priority: growth in customers, revenue, or profitability? I'll assume Nubank wants profitable growth with stable loss rates; customer growth in Brazil is slowing because Nubank already serves about 118 million Brazilians.

• User impact: how many existing customers are "limit-constrained" (using over 80% of their limit regularly) and how many good-quality applicants are currently declined? I'll assume millions in each group.

• Technical: how accurate are models for each group? I'll assume models are more accurate for existing customers (rich internal data, including nuFormer's transaction-based predictions) than for new applicants (mainly bureau data).

• Regulatory: any limits on credit growth or concerns about household indebtedness? I'll assume the Central Bank watches card revolving and installment debt closely.