APIs: LATIN AMERICA
Bringit Bring iton! on! Addi is a home-grown point-of-finance solution in Latin America – the second fastest-growing region for e-commerce in the world, but also one of the smallest. It’s why Co-founder Daniel Vallejo isn’t fazed by global BNPL competition As in other fast-growing e-commerce markets, such as Africa and Asia, the online payment experience in Latin America is far from ideal. While less than 20 per cent of Latin Americans own credit or debit cards, according to the World Bank, those that do often find they are not enabled for online transactions; and only a small number hold international payment cards, so their buying choices are limited. Interest rates are, in any case, crippling. The Brazilian government recently considered capping rates charged on consumer credit products, including credit cards, which have climbed as high as 200 per cent APR. Partly as a response to this restricted use of plastic and partly due to regional governments’ policy of digitisation and financial inclusion in an area of the world www.fintechf.com
where only just over half of adults hold a bank account, there has been an explosion in alternative local payment methods. The first-ever instant payment system, PIX, was launched in Brazil in November 2020, and e-wallets, Nequi in Colombia and PagBank in Brazil, for example, have witnessed massive growth. But there is another defining characteristic of this colourful payments market: instalment plans. Known as parcelas in Brazil, cuotas in Argentina and meses sin interés in Mexico, interest-free, split payments began as a way for in-store retailers to survive periods of hyper-inflation when cash was scarce. Today, it’s estimated that, across the region, more than 60 per cent of transactions on- and offline, are enabled by instalments – even for comparatively low-ticket items – and up to a whacking 77 per cent in some countries. But, even here, there are drawbacks, not least that instalment plans are often linked to credit cards and tie up a cardholder’s credit line until the entire instalment plan is paid off; and getting approval for point-of-sale (POS) finance is frequently a long-winded process. Buy now, pay later (BNPL) startup, Addi, aims to get around such limitations. It uses just an ID card, email address and WhatsApp account to extend finance instantly at the checkout.
The company was founded in Colombia in 2018, and in the middle of the COVID-19 pandemic, in May 2020, raised $15million in a Series A funding round. It will launch in Mexico and Brazil by the end of the year. Addi uses APIs to integrate with merchant sales processes online and in-store. Right now, the focus is on the latter, but with e-commerce forecast to grow by 19 per cent across the region in 2021, online is where the real potential to scale is. Latin America is now the second fastest-growing market for e-commerce in the world: in Colombia alone, online payment platform PayU saw nearly 1.500 new merchants sign up in the second half of April 2020, alone. “Nevertheless, e-commerce in Latin America is still less than 10 per cent of all commerce,” says Addi co-founder, Daniel Vallejo, “so, there’s a huge opportunity to grow. The other key thing to remember about e-commerce is that transaction approval is incredibly low. More than 70 per cent of transactions in some markets are declined. So, retailers spend on Google and Facebook ads, generate the traffic, get the consumer interested in buying – and then they can’t.” Addi’s API-driven platform presents loans to consumers as instalment plans at the checkout, with a clear schedule of payments. Applications can be approved in less than 10 minutes. Issue 8 | ThePaytechMagazine
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