Friday Briefing: Microloans create opportunities for fintechs and borrowers

December 16, 2022

#TopStory 🔝

Vote of confidence for mobile microloans

As loans become more expensive, can mobile data be used to reverse the trend? Companies offering microloans via smartphones are drawing on alternative risk models to expand access to financing for people ignored by the traditional banking system.

This is the path being followed by Baubap, a Mexican fintech that recently received a US$20 million credit line from Park Cities Asset Management to bolster its microlending in the
country. The fintech evaluates applicants’ credit risk using alternative data stored on their cell phones, avoiding the need for credit bureaus. It grants loans of between US$25 to US$250 and with terms of up to 45 days; interest is charged at 25%, compared with the financial system’s average 38% rate on credit cards.

“This is a product that allows us at Baubap to know our customers’ true ability and willingness to pay,” Roberto Salcedo, CEO and co-founder of the fintech, told iupana. “And we address the client’s short-term need: immediate liquidity for making a small investment in an economic activity that can turn the money around very quickly,” he adds.

Baubap uses machine learning technologies and artificial
intelligence to adjusts its risk engine to groups such as retailers and catalog vendors, among others. “As digitalized people, we use a smartphone every day and generate information about our lives without realizing it,” says Salcedo.

This formula has increased Baubap’s monthly lending to US$15 million through end-November, compared to the US$3 million a month registered last year. The company’s non-performing loan ratio stands at 8%.

There’s room for more fintechs to target this niche in Mexico. A study published in January by the Inter-American Development Bank (IDB) indicates that microloans have yet
to return to pre-pandemic levels.

NIBank expands offering to LatAm

North International Bank (NIBank), a lender based in Antigua and Barbuda, is looking to attract borrowers in Mexico, Guatemala, Colombia, Venezuela and Uruguay with a new credit card and a simple, digital onboarding process.

The  Mastercard credit card was developed in conjunction with i2c, a payment technology provider, building on the bank’s existing digital platform for debit cards.

“We started by developing the black card program for a very exclusive clientele, and not just for bank customers but with a goal of massifying this type
of product,” Jordán Silva, NIBank’s founder, told iupana.

NIBank has specialized in BIN sponsorship of prepaid cards and the latest product expands its ecosystem of financial solutions.

#Strategic Plays 📊

FinSphera obtains fintech license in Mexico

Crowdfunding company FinSphera received authorization to operate in Mexico. So far, 43 companies have received a local operating license: 28 as electronic payment fund institutions (wallets) and 15 as collective financing institutions (crowdfunding).

Bitso and Félix Pago offer remittances via WhatsApp

Cryptocurrency exchange Bitso joined forces with Félix Pago, a remittance technology provider, to enable crypto transfers via WhatsApp from the US to Mexico. The transfer fee is US$2.99 and users can send up to US$1,000 daily or US$10,000 monthly. Bitso shared its vision of the growing crypto remittance market in a recent interview. Read it again here.

Binance passes “extreme stress test”

The world’s largest crypto exchange, Binance, which has a presence in LatAm, weathered a wave of withdrawals this week triggered by a Reuters report saying that the U.S. Department of Justice is undecided about whether to launch an investigation into the fintech company. The report came hot on the heels of the arrest of Sam Bankman-Fried, the founder and chief executive of another crypto exchange, FTX.

“We think that it’s important to note that yesterday’s market sell-off
resulted in approximately US$1.14bn being withdrawn from our platform in a 12-hour period, which was managed with ease. We passed this extreme stress test because we run a very simple business model – hold assets in custody and generate revenue from transaction fees,” Binance said in a statement on Wednesday.

Also…

• The PedidosYa superapp sealed an alliance with
  Banesco Panama for a digital Visa credit card.
• In Colombia, security company Prosegur acquired the fintech Smart Coin, which exchanges coins for bills. Prosegur said cash continues to be Colombians’ preferred payment option.

#Financial results 💰

Creditas remains in the red despite record revenue

Brazilian fintech Creditas reported record revenue of R$484.2 million (US$90.7 million) in the third quarter, virtually double the R$244.6 million registered in the the same period of 2021. However, the company still saw a net loss of R$245.6 million in the quarter, bringing the year-to-date loss to R$858 million.

#Investments 📈

Celeri drums up US$2.6 million

Argentine startup Celeri, which specializes in financial industry compliance, received an investment of US$2.6 million from firms including Y Combinator and Commerce Venture. The proceeds will be used to accelerate its expansion throughout LatAm.

Also…

• Pagaleve, a Brazilian buy now, pay later (BNPL) startup, received US$1.9 million in a financing round co-led by Banco do Brasil and Salesforce Ventures.

#People 🫂

N26 Brazil hires ex-Google exec

German neobank N26 hired César S. Cesar to be its product director in Brazil. Cesar has worked at Google, Xerpay, Seek and Zenvia and aims to strengthen N26’s “fincare” vision by creating digital finance products that seek to improve users’ relationship with their money.

Santander Group appoints new CEO in
Mexico

Felipe García was named CEO of Santander Mexico and country head of the Santander Group, effective January 1. García joined the Spanish lender in 2020 and has more than 25 years’ experience in banking.

#iupanaExclusive 🔥

This week, we profile the six women who led digital finance innovation in the region this year and were chosen by iupana to receive a Disruptoras award. Since 2020, we’ve paid tribute to the women creating new solutions and transforming the industry.

• The winners were announced at the Women in Digital Finance event, where they discussed the challenges facing women in the industry, such as equal pay and the “impostor syndrome.”
• The Disruptoras highlight advances in the fintech ecosystem across the entire region and all industry verticals.

Meet our Disruptoras in this week’s iupanaExclusive.