Friday Briefing: Schools + fintechs = A new niche

February 10, 2023

#TopStory 🔝

Schools + fintechs = new business models

At a time when venture capital has become scarcer and startups are having to fight hard for investments, new business models are emerging in the fintech sector.

Educbank, a financial services platform for schools in Brazil, is among the firms looking to capitalize on opportunities in education—a segment of the economy with limited access to finance.

The firm provides institutions with a capital advance in exchange for a fee, which it calculates using risk patterns provided by machine learning. The company insures the schools for an amount
equivalent to the total monthly income from tuition fees, and deducts a commission of between 3% and 17%. In the event a student doesn’t make a payment, Educbank steps in to cover it.

“We analyze the cost-benefit of an institution, the price it charges and how that relates to the quality of education it delivers,” founder Danilo Costa told iupana. “Because, from our point of view, there is a linear  correlation between a school’s student desertion [ratio], the price it charges, and the quality it delivers.”

That relationship is important for the startup because it’s the basis of its non-payment model and if a lot of students decide to leave an institution without paying, Educbank has to foot the bill. However, the
non-payment rate remains below one digit, Costa says from Sao Paulo.

In July, the platform raised some US$40 million (R$200 million) in a series A round led by Vasta, a Brazilian tech services company catering to schools. It aims to have a total 800 institutions on its books by the end of the year. The startup also provides administration software as well as physical and digital means of payment.

Platforms such as Fidu in Argentina and Mattilda in Mexico operate similar models. In Colombia, meanwhile, microcredit fintech Juancho Te Presta is targeting a different market: financing the purchase of school supplies, a
service it launched this week.

“Is it possible to invest in basic education? Yes. By providing this sector —which is so important both from a social and economic point of view— with access to capital in a scalable and structured way,” says Costa.

#Strategic Plays 📊

Inter acquires US mortgage originator

Brazilian super app Inter has acquired YellowFi, a Miami-based mortgage originator and real estate fund manager. The acquisition will allow Inter’s clients to invest in the US real estate sector and is part of its plan to expand its presence in the country.

GlobalPay debuts card for store owners in Central America

American fintech GlobalPay Solutions introduced Rocket Mastercard Prepago, a prepaid card that will allow entrepreneurs and shopkeepers in El Salvador, Guatemala and Honduras to digitalize payment methods. The card is linked to a digital wallet with other functionalities, such as receiving payments and remittances.

Wolet moves into Colombia

Peruvian fintech Wolet, which provides loans to micro and small entrepreneurs, has expanded into Colombia. The platform started operations in conjunction with the Tpaga wallet and Moviired.

Also…

• Crypto exchange Buda.com will provide a personalized over-the-counter (OTC) service to corporate clients who buy or sell more than US$ 50,000 worth of crypto assets.
• In Peru, Grupo Independiente launched Flip Inversiones, the country’s latest option for digital investments.
• Also in
  Peru, fintech Máximo tied up with Binance Link, a Crypto-as-a-Service proposal from the Chinese exchange offering a wallet with crypto products.
• In Panama, Switch Soft, a billing and business management system, launched Switch Card, a debit card for SMEs, in partnership with Mastercard.

#Investments 📈

IBD Lab invests in Monashees X

The Inter-American Development Bank Group’s startup financing arm, BID Lab, invested in Monashees X, a Brazilian fund specializing in venture capital. The money will be reinvested in some 30 startups that develop solutions in areas such as technology, finance, education, health and logistics in LatAm and the Caribbean. The size of the investment wasn’t disclosed.

Minu raises US$30m

Mexican fintech Minu raised US$30 million in a bridge round to expand its solutions throughout the region. The personnel management platform seeks to improve employee retention and promote savings and financial education.

#People 🫂

Nu Colombia loses country manager

Catalina Bretón is stepping down as country manager for Nubank in Colombia. She’ll stay on during a transitionary period to assist her replacement, who the digital bank has yet to name.

#iupanaExclusive 🔥

Where should a consumer goods company direct its fintech efforts in LatAm? The digitalization of the payment and distribution chains seems to be a good bet. This week, we spoke with Coca-Cola and Arcor’s LatAm investment fund, Kamay Ventures, which says the beverage firms are ready to test fintech platforms that can add value to the data generated in distribution chains and curb the use of cash in payments.

• Corporate venture funds see investment opportunities in ERP tools that allow MSMEs to organize cashflow, control inventory, and obtain financing.
• Kamay plans to invest in seed rounds in 2023 and 2024 with
  individual disbursements of up to US$500,000.
• Fintechs Flexio and Cumplo, meanwhile, describe the obstacles and opportunities to digitalize the SME operations in the region.

Find out more about where corporate venture funds are looking to invest in this week’s iupanaExclusive.