Brazilian Fintechs Want to Surf the Buy-Now, Pay-Later Wave

Provu is launching a BNPL-focused POS for brick-and-mortar retail and Koin wants to consolidate in Brazil while taking its first steps in Mexico

Courtesy/Provu
February 07, 2022 | 11:43 AM

Bloomberg Línea — Leia em português

Brazilian fintech Provu, MarketUP, and ABL Group are launching a digital credit POS for brick-and-mortar retail customers. Through Provu’s Buy Now, Pay Later (BNPL) model, the installment payment of purchases can be made on totems and POS using ABL as a sub acquirer.

The devices will be available for more than 150,000 active entrepreneurs on the MarketUp business management platform. It works like this: customers register and Provu performs a credit assessment. The client can install the purchases by paying with in up to 24 times, and Provu receives a fee from the client and the retailer.

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However, retailers who subscribe and request the payment terminal will have the first six months free of charge. The new BNPL machine is only accepted on MarketUP’s platform and does not process other means of payment. The POS also does not process cards.

Provu offers Buy Now, Pay Later as a credit option at checkout. In e-commerce, the fintech has integrations with VTEX and Nuvemshop, platforms that operate sales sites.

The company also has partnerships with around three hundred retailers, including large customers such as Polishop and Electrolux. The idea of the devices came as a means to achieve greater capillarity and reach smaller retailers, who often do not have an online presence.

“We have been practically doubling the volume of the BNPL product in the last three, four months,” said Marcelo Ramalho, CEO of Provu.

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Talking about these unbank installments alternatives is nothing new for Brazilians, who have been used to the so-called “crediário” for 60 years. The great novelty of BNPL was to bring the model of the digital crediário, the payment option for those who do not have a credit card and wish to pay in installments.

Even so, the cash-based alternative such as Brazil’s payment slip boleto, or a voucher system issued by local convenience stores such as OXXO in Mexico, requires the client to have money in the account to make the payment. Through BNPL, fintechs finance this payment of the boleto in installments at the point of sale.

“I see the fact that Brazil has this history with crediário as extremely positive. There is no need to educate the retailer or the consumer since this form of payment is a familiar thing to them. But we don’t necessarily see the BNPL only as online. I would say it is digital, which is a little bit different. I can have both the digital and the online experience inside the physical shop, which is what we are doing now with these POS”, explains Ramalho.

According to the CEO, Provu has plans to bring this experience of guaranteeing credit at the point of sale to an application, without the need for a vending machine. “We have the potential to digitalize credit to allow it to be consumed in all channels,” he said.

In the model with interest for the customer, Provu’s remuneration comes from the credit operation. But soon, Ramalho says that the company will launch the model of interest-free installments for the customer, made with a discount rate at the retailer. The value of the rate depends on the retailer’s profile, the customer’s profile, the retailer’s segment, and the ticket of the product.

The BNPL model became known worldwide by Australia’s Afterpay and global companies such as Affirm and Klarna, which also offer credit solutions for installment purchases. In Latin America, Nelo, Alchemy, Addi, dLocal, Dinie, Kueski, and Koin are some of the companies competing in this market.

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“I think this ends up being a validation of the potential of this market. It is a very democratic product when it comes to consumption, reaching people who do not have access to a credit card, for example,” he says.

Last year, Provu raised R$ 1.4 billion from Goldman Sachs, an amount that is being invested in the BNPL product.

Provu’s first business is a personal loan product, but Ramalho says that BNPL’s volume and growth potential has proven to be much greater month by month. The company aims to serve more than 250,000 customers by 2022.

“This partnership with MarketUp is a test. We are willing to learn. We want to offer our solution beyond the e-commerce channel, but also allow it to be offered in the physical world, where we still have a large presence. E-commerce has been growing month by month, but the size of face-to-face retail is still quite significant,” said Ramalho.

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Koin: the fintech takes first steps in Mexico

Koin, a fintech that was acquired by the Despegar Group in 2020, also offers BNPL in Brazil under the name “Boleto Parcelado”. According to Koin, in the world, BNPL had a growth of 400% in 2020 and should move $680 billion in 2025, compared to $354 billion in 2019. In the US, about 56% of consumers used the model in 2020, up from 28% in 2019.

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According to Koin, BNPL’s top customers are digital natives, Millennials, and Generation Z, and 49% of consumers spend more when using the installment bill option.

Koin is a financial solutions provider for B2B and B2C and is also integrated with e-commerce platforms VTEX and Magento. Today, the fintech has partnerships with the edtech Descomplica group and Ame Shopping, of the Ame digital wallet, of the retailer Americanas group. The company provides the BNPL payment model to around 10,000 potential shopkeepers through the e-commerce marketplaces. Gabriel Lacombe, COO of Koin, explains that the company finances the customer’s installments through the shopkeeper and guarantees the payment option by both Brazil’s boleto and Brazilian instant payment system PIX.

The fintech also charges the merchant a fee, the MDR (Merchant Discount Rate), which varies according to the size of the transaction. “It may be that we can get a more competitive rate than a credit card,” Lacombe said. Koin also takes care of anti-fraud processes for the shopkeeper and has funded more than R$500 million via Boleto Parcelado since 2019. The company processes 20,000 transactions per month.

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Now, Koin is taking its first steps in Mexico. For Lucas González, Head of Strategy at Koin, the idea, after Mexico, is to reach Colombia. The reason for the expansion is because the country has one of the lowest population banking rates in all of Latin America, 36%, while the region’s average is 55%, according to Koin.

“To shop online, Latin Americans did not have all the tools for installment purchases at a time when the level of e-commerce has been growing in the region,” González said.

Access to credit in Mexico is also lower than in the region, 27% versus Latin America. The Mexican market, besides being the second largest in the region and with the highest percentage of unbanked, is also attractive to Koin because of Despegar’s operations in the tourism sector in the country, after the acquisition of BestDay.

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Besides, Mexico’s regulatory environment, coupled with the country’s growing e-commerce penetration, makes Mexico the fintech’s next target. “It makes sense for us to be a player in Latin America,” González explained.

Koin hopes to capture a 10% market share in BNPL in Latin America over the next five years. “Our credit engine is adapted to guarantee financing for BNPL and not personal loans. The customer experience is different in these two models. Our obsession is that the customer has the best experience, that the transaction is handled in seconds and that is our main differentiator against the solutions that exist today in Mexico, where you have to download an app and everything makes the conversion difficult.”

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