"Everyone told us that prepaid cards had never worked in Argentina," reminds iProUP Pierpaolo Barbieri, CEO and founder of Ualá, the young Fintech who has just received a funding that is the envy of traditional banking: $ 150 million .
The figure, which shook the local financial world, places this company within the major leagues of the regional entrepreneurial ecosystem and in the race to become the next Argentine unicorn.
In the first place, because it was a Series C round, which in jargon means that investors seek at least double their disbursements, despite the fact that the firm still shows red numbers. "The bet is in the long term," says Barbieri. Second, because this capitalization was led by two global heavyweights that went on the "hunt" for startups with international projection.
- On the one hand, Softbank, the Japanese giant that created a special fund of US $ 5,000 million for Latin America, of which it already used US $ 1 billion in Rappi and participated in a round of US $ 140 million in the Brazilian e-commerce firm Vtex. Ualá is the first direct bet on Argentine soil.
- On the other, Tencent, the Chinese bigtech that is already the fifth most capitalized technology in front of Facebook and that bet US $ 400 million in the Brazilian Nubank, the most valuable fintech in the West. He also made a disbursement in Ualá in April.
Thus, local fintech accumulates US $ 200 million since the beginning of its activity, just a couple of years ago (October 2017). This good performance not only places it one step away from becoming a unicorn. It also took by surprise more than one manager of traditional banking, a sector that is facing an accelerated process of transformation, forced by the unstoppable irruption of the digital economy.
This can be seen by the HSBC, which began its branch closing process; or ICBC, now in full internal restructuring; o Banco Galicia, which reduced hundreds of jobs; or Santander, Citi and Itaú, which are also rethinking their payrolls; And the list goes on.
In economic terms, the impact of emerging, flexible, small companies that base their operations on the Internet is reflected in numbers that exempt comments: Ualá, for instance, with just two years of life, is valued at US $ 900 million according to Bloomberg , a figure that quadruples the capitalization of the Mortgage Bank ($ 240 million), one of the emblems of the conventional financial system.
In addition, the $ 150 million that Ualá got ($ 9.9 billion pesos) is more than double the $ 4.2 billion that Galicia could collect days ago to finance itself in the capital market.
The transaction could be compared for its importance with the sale of Citi retail banking, in which Santander paid US $ 400 for each client, while US $ 115 was disbursed for each user of Ualá. Of course, there are caveats: fintech was not purchased, but instead made a significant investment, and the Spanish capital entity received a "closed business" with ABC1 customers and not a company with strong growth potential.
Long term
Contrary to several companies in the field, who dream of virtual wallets capable of grouping the most complete offer, Ualá's strategy focuses on "step by step" and focusing on the product in the long term.
This long-term vision is shared by Andy Freire, regional representative of SoftBank, who assures iProUP that the capital injection was calculated based on the projected earnings until 2025: "We believe that Ualá will be a great player in the coming years."
But, what are these projections based on, given that Argentina is going through a pressing economic scenario and cannot leave the stocks?
According to Ignacio E. Carballo, director of the Fintech & Digital Banking Program at UCA, the country has certain comparative advantages for fintech development:
- A smartphone penetration higher than the regional average
- A bank exclusion also higher than the South American average
- Market growth at higher rates (almost 70% last year) than other pioneer fintech ecosystems, such as Brazil, Mexico and Colombia
"This shows that, even with the wind in macroeconomic terms, it is an attractive scenario for long-term funds," he says. Such a diagnosis is shared by one of the main fintech in Argentina, whose managers believe that the problem is not the current economic situation, but more structural issues.
"Due to the strong penetration of smartphones, the low banking and high profitability of local banks, which translates into costs for the user, it is inevitable that Ualá will succeed," they emphasize in strict off-the-record for being precisely a competitor of this firm.
Freire, of SoftBank, is in tune with that vision that the local scenario is promising for the development of fintech. He assures that such disbursement "aims to achieve a return rate above 30%, given the natural risk of this type of companies."
The truth is that the startup has plenty of space to grow in the country. Although it has already captured 4% of the population, it only reached a part of its target audience, given that in Argentina 50% of the economically active population is not banked.
Although Ualá offers a prepaid card and investment funds, it still remains to offer a large amount of services to its user base and fight digital banks equally, even more so considering that it is six times the number of users.
"We are not going to verticalize everything," warns iProUP Barbieri, ruling out that the funds obtained will only be used to add features. He anticipates that the big bet is "to build the best financial services market, transparent, interoperable and inclusive".
The future
Ualá investors are clear about the "step by step" strategy and that it is not convenient to add functions just because they are available in the market. That is why they bet heavily on Argentine fintech.
SoftBank, for example, has already experienced the disbursement in projects such as WeWork and Uber, with unrealistic schemes of high demand for funds and based on annihilating competition rather than generating a healthy company.
Perhaps, Ualá has put the mantra of "focusing on the customer" like nobody else into practice. The CEO himself maintains an active strategy in social networks so that his collaborators imitate him: he answers the comments of the users and even takes into account the suggestions to improve the app.
These suggestions, and even the possibility of expanding the service beyond the limits of Argentina, are on the road map of Ualá, beyond Barbieri stepping on the stop before the questions about the next news: "We do not talk about the things that they haven't happened yet. "
"Bet on a very specific niche that will seek to expand, will have to internationalize and focus on other countries and more products, the different verticals of financial systems, not only payment and credit, but also investment and savings, as they are already doing" , says Carballo.
The company's expansion to other countries in the region was surely decisive in closing a disbursement of such magnitude. In fact, in the Fintech ecosystem they assume that next year Ualá will open its office in Mexico, the country in which Barbieri was in September.
In addition, Marcelo Claure, CEO of SoftBank, fed the rumors of the internationalization of Ualá: "We are happy to announce our first direct investment in Argentina. We believe in his passion, talent and vision to resolve financial inclusion and become a relevant regional play ".
We are happy to announce our investment in @uala_arg, our @SoftBank first direct investment in #Argentina ????????. We believe in their passion, talent and vision to resolve financial inclusion and to become a relevant regional player. We believe in #LatinAmerica!
- MarceloClaure (@marceloclaure) November 25, 2019
In addition to geographical expansion, there will also be an expansion of its products. The company's roadmap bets on three pillars: purchases, savings, and financing.
At this point, some competitors assure iProUP that one of the next steps will be to consolidate the granting of microcredits, the fastest growing sector in the Fintech ecosystem: 58 of the 223 companies mapped by the sector chamber are dedicated to this area.
Another of its steps will be in the sense of payments with QR, given the imminent interoperability of the system, which will allow all wallets to read not only their own codes, but also those of their rivals.
With regard to investments, he recently launched common funds. "The answer is incredible: 48 after the launch we already had more than 100,000 accounts activated," Barbieri says enthusiastically to iProUP, who also reveals the fate of the funds obtained.
"We are going to boost our growth. We want to create more than 400 jobs and expand our business units," said the manager, who emphasizes the "team and the obsession with the product" as secrets of the company's success.
However, in "City 4.0" they say that Ualá is at a time when they must "bring money in exchange for growth", so you should leave with a much more aggressive strategy.
"They will be obliged to win the market at any rate: sell dollars at zero spread, offer loans at a lower rate or raise the return on the investment fund," they say from an important competing fintech.
Now, what is disruptive about a Wealth Management app to attract the attention of large international funds? According to Carballo, there is no key.
"They had the ability to unite the best pieces to create an innovative product, since financial inclusion is there, it only remains to present it properly. It should be noted that, unlike other competitors, it betrayed a lot in creating a community of customers that reference each other and give a personalized service, "says Carballo.
Another of the successes of Ualá is the implementation of a prepaid card so that non-banks can pay for their purchases on the Internet (Mercado Libre, Netflix, Spotify, among others) and also in physical stores. But using the app to analyze those consumptions and disaggregate them by type: supermarket, transport, restaurants, travel, etc.
Thus, they imitated from the telephone operators the "control account" approach to help manage their finances to users in a format they already knew. An "anti-crisis" solution applicable to the majority of the unbanked public in all Latin American markets.
