This week, we review the progress of the digital real pilot in Brazil, and its impact on the digitalization of LatAm’s largest economy. Rappi dismisses talk of an IPO and capital constraints, saying it has enough cash available. In Mexico, meanwhile, Covalto is in no hurry to list on Nasdaq, Walmart buys Trafalgar and Clara and Afirme join forces for SME lending.
#TopStory
Real digital pilot advances in Brazil
Privacy and infrastructure were the words most frequently used during a workshop held this week by the Brazilian central bank, or BCB, where it gave an update on its project to create a virtual currency, the digital real. Starting in May, the so-called RD pilot will bring together participants representing a cross-section of the ecosystem.
Fabio Araujo, who is coordinator of the digital real initiative and a consultant for the central bank’s department of banking operations and payment systems (Deban), underlined the importance of diversity in the composition of pilot participants. “Our idea with the test is to replicate the ecosystem of the Brazilian financial system, with representatives of all types of institutions, large and small, such as banks, cooperatives, payment institutions,” he said.
Brazil leads the way in Latin America in the development of a central bank digital currency (CBDC), and has caught the attention of peers such as Peru and Mexico that also want to use digital currencies to massify digital payment, savings and credit operations.
“The main motivation we have with the digital real is the tokenization of the economy,” said Rogério Lucca, who is head of the Deban, during the workshop. According to Lucca, the tokenization market is growing despite the fact the bank lacks infrastructure for such technologies that would allow operations to be settled with CBDC.
The central bank’s pilot will begin with the tokenization of four types of assets: bank reserves, savings held at financial institutions, deposits at payment institutions and treasury bonds. Last month, the BCB announced that the Hyperledger Besu system will serve as its distributed ledger technology (DLT) platform of choice, and said it was going to simulate the trading of treasury bonds between two individuals.
Under the BCB’s plan, each participating institution will be a node within the Hyperledger Besu network. The central bank’s primary focus is assessing the technology’s ability to address privacy, programmability, and infrastructure issues within this new ecosystem.
#Strategic Plays
Rappi rules out IPO, buys Box Delivery
Colombian unicorn Rappi has reached a sufficient scale and level of sustainability as a business that it does not need to consider making an initial public offering (IPO) or require new fundraisings, Sebastián Mejía, president and co-founder of the superapp, told Bloomberg Línea. His comments follow reports questioning the profitability of its finance vertical amid timid growth in the placement of credit cards in Peru. Separately, Rappi announced the acquisition of its Brazilian counterpart Box Delivery, creating a more formidable rival for another local delivery platform, iFood.
Covalto gets more time for Nasdaq debut
In August last year, David Poritz, the co-founder and co-CEO of Covalto, told iupana the company expected to go public in the first quarter of this year. However, that timeframe appears to have been pushed back after Covalto, which provides digital banking services to SMEs, said the deadline for its merger with special purpose acquisition company LIV Capital has been extended until February 2024. The lender declined to comment on the reasons for the delay when asked by this news outlet.
Walmart Mexico buys Trafalgar
The Mexican arm of US retail chain Walmart acquired Trafalgar Digital, a fintech licensed in Mexico as an electronic payment funds institution. The transaction represents the latest attempt by Walmart to expand its presence in digital finance. The group, which sold its local Banco Walmart arm to Grupo Financiero Inbursa in 2015, currently owns the Cashi digital wallet. It begs the question whether Trafalgar will be absorbed by Cashi or vice versa…
Afirme and Clara join forces to finance SMEs
Banca Afirme teamed up with Mexican fintech Clara to offer long-term lending to SMEs with the aim of granting more than 200 loans this year. Afirme will provide lines of credit to Clara’s clients with terms of up to five years, complementing the fintech’s credit card and expense management products. Clara, for its part, will allow the bank to lever its technology in order to reach new customers.
Volkswagen launches fintech in Brazil
Volkswagen introduced VOU, a Brazilian fintech geared towards dealers and related companies, in what is the first foray into fintech by a car company. VOU said it has already started to provide business clients with money management products, such as accounts receivable advances.
In addition…
- In Brazil, Grupo Santander merged its Sim and Mais Vezes credit brands. The banking group will now offer personal loans and buy now, pay later (BNPL) financing under the Sim brand.
- Japan’s Credit Saison plans to set up operations in Brazil and Mexico. The firm is looking for banking and fintech partners to support lending to individuals and SMEs.
- In Mexico, six more companies received fintech licenses: Alto Azareo and Sylon Capital as electronic wallets; and Ucombi, Expansive Realty, Grupo Quindalo and Maussan y González as crowdfunding companies.
- In Argentina, the N1u digital wallet kicked off operations with the aim of carving out a niche among young people and gamers.
#Investments
Kaszek raises US$975M for investing in Latin America
Venture capital firm Kaszek Ventures raised US$975 million for two new Latin American investment funds. One fund has US$540 million for investing in early-stage companies and the other has US$435 million for later-stage startups.
Brazil’s Z1 raises US$10M
Brazilian digital wallet Z1, which caters to users under the age of 18, raised US$10 million in a round co-led by Homebrew, Parade Ventures and Kindred Ventures. It aims to use to the proceeds to expand its target audience to include adults.
#People
Magalu appoints new CEO
Brazilian fintech Magalu appointed Carlos Mauad its new CEO. Mauad has extensive experience in finance and payment solutions, having previously led Banco Carrefour. He also spent time at Citibank.
Belvo names CEO in Mexico
Payment initiator Belvo named Federica Gregorini its new CEO in Mexico. She was previously head of product management during a four-year stint at car sales platform Kavak.
#iupanaExclusive
How many LatAm bank spinoffs can you name? We’ve prepared a map of the digital brands that traditional banks are using to modernize their image and reach new customer segments.
- Banks are taking the spinoff route in order to compete with fintechs.
- Lenders are not worried about cannibalization.
- Digital brand extensions are reaching audiences beyond the reach of bank’s traditional products.
Get to know the region’s digital banks with this week’s iupanaExclusive.