The coronavirus crisis has boosted digital payment methods while measures of social distancing drive consumers away from the use of cash worldwide. In this unprofitable scenario for a lot of companies, the SoftBank-funded Ualá has found its way and has been expanding rapidly. It doubled the number of cards issued in 10 months, from 1 million to 2 million.
The Argentinian startup is 2 years and 7 months old, and its quick growth was pushed by the pandemic, resulting in a massive increase of app downloads and transactions. About this, LABS talked to the Head of Public Relations in Ualá, Julieta Biagioni.
“In general, what we perceived with the coronavirus pandemic was the demand growth as people adopted new habits”, she said, adding that a year-long growth plan took place within months. With the pandemic and the lockdown decree, Argentines had to resort to digital means to pay their bills. Since then, Ualá’s digital bill payment service, which has Western Union as its partner, skyrocketed on transactions last month.
Before the pandemic, Ualá reached new users with its digital ads campaigns, but, when the coronavirus crisis hit Argentina, Biagioni says that the startup reduced this sort of ad investment and still got a lot of people with an organic interest for Ualá. “But it didn’t grow as much as the app itself has grown”, she reported.
The application also allows the user to control expenses. In October last year, the company renewed cards including chip and contactless payments and innovating with a vertical design, the first one in Argentina.
The app is available for Argentina on Android and iOS and it’s in all cities in the country. More than half (68%) of cards issued are in the city and metropolitan region of Buenos Aires.
Biagioni said that because of the WHO (World Health Organization) advices on social distancing, people left the streets, and citizens who once only used Ualá for online purchases now started to pay their bills such as water, gas, and other services through digital ways.
With Ualá’s card, Argentines can make purchases in any physical or online commerce in the world that accepts Mastercard. Through the application, users can perform various transactions such as paying bills for more than 4,000 services, topping-up prepaid cell phones, requesting loans, investing in investment funds managed by the SBS group with the immediate possibility of cash.
Besides Western Union, Ualá works with RapiPago and PagoFacil, that are extra-bank channels in Argentina dedicated to the collection of public and private utility bills and taxes. The fintech’s prepaid card can be topped up by RapiPago and PagoFácil or even a bank or virtual account. Biagioni explains that, since those channels were closed during the quarantine, a lot of people that probably have never done a virtual transaction started to do it and to approve the digital transactions method instead of paying through those channels.
Numbers show that the fintech is doing well. The AUM (asset under management) of the fund that the fintech has with the SBS group had peaks of 25% during the pandemic. During quarantine, the startup opened job positions and did 50 onboardings in a remote way.
Currently, Ualá has 330 employees and has sent them all to work from home even before the Argentine government established the lockdown policy. The startup has now 60 job offers. “We hope to end 2020 with 600 people”, she said. There are also no plans to return to the Buenos Aires HQ so far, since the tech company can fully perform remotely, according to Biagioni.
According to Ualá, 6% of users of the app are foreigners, predominantly Venezuelans and Paraguayans. Also, 7% of the cards are issued to minors under 18, since in Argentina it’s possible to obtain cards from the age of 13 with parental authorization.
The upcoming unicorn has a favorable scenario for growing in Argentina since a large proportion of citizens are unbanked. According to the World Bank Global Findex study in 2017, when Ualá was born only 48% of Argentines had a bank account.
Talking about the industry, the same index showed that only 7% of Argentines have applied for a loan from a financial institution and 41% have a debit card, against 24% who have a credit card. Also, almost 70% of cell phones in Argentina are prepaid.
Growth despite the crisis
On the other hand, the South American country is one of the most difficult business environments for investors. The country is heading for its ninth sovereign debt default, and yet big names in technology like Tencent and SoftBank put their infusions in the startup. Ualá received a $150 million C series investment round in November 2019 and has also seed capital investments and a non-public figure for Tencent in April 2019. About future rounds, the fintech prefer not to talk.
“Economically speaking, Argentina has a lot of lacks, but we have this coronavirus crisis context worldwide. We see that the fintech industry will pass through it, as well as e-commerce companies that are growing”, says Biagioni. “Truth be told, the fintech industry usually shows signs of growth in Argentina and Brazil. We see more and more fintech, not only for paying methods but also for investment options, crowdfunding”.
According to her, Ualá and other fintechs were already set to grow, but as the pandemic promotes the use of virtual ways, it’s expected that even more people will start selling products and services online. “For that, people will need a digital payment method and Ualá keeps growing also as a payment method for products and services”, she said.
Growth because of the crisis
MercadoLibre‘s digital wallet MercadoPago, Brubank, and the Brazilian Nubank are the main rivals of the emerging unicorn, but, attempting to transform Argentina’s economy digitally, the fintech biggest rivals are cash transactions.
Fintechs are growing despite the crisis, or because of it. A survey of the Argentine Chamber of Fintech and Finance Secretariat showed that the fintech category grew by 63.1% and reached 217 companies in Argentina. Of these 217 companies, the segment with the most companies in the country is “Credit”, responding for 58 of them, which represents 26.7% of the ecosystem.
Talking about the fintech industry worldwide, the majority of companies are located in the “Digital payments and transfers” category. In Argentina, this is the second most important item, with 39 companies (18%), followed by “Technology provider”, with 29 companies (13.4%); “Blockchain & Crypto”, with 25 (11.5%); “B2B fintech services”, with 21 (9.7%); “Wealth management” (investments), with 18 (8.3%); and “Collective financing” (16 or 7.4%); “Insurtech” or insurance (7 or 3.2%); and Cybersecurity (4 or 1.8%). Most of them are SMEs.
According to the Kantar Study of August 2019, 6 out of 10 Argentines recently made a financial transition with their cell phones, a medium that has grown more among men (65%) and in the sectors with greater purchasing power (73%) and among people who are 35 and 49 years old (67%). Talking about Argentines who are using the virtual payment method, 94% said the app experience was excellent and 2 out of 3 now say they prefer this type of app for these operations. Most use the platform to pay for services (37%), top up a cell phone (29%) and pay for the SUBE card (22%), which is a card used on public transport services within Buenos Aires.