Business

Brazilian fintech Cora wants to surf the wave of new financial regulations in the country

Co-founder Igor Senra talked to LABS about how open banking can drive the expansion of the startup, which has 20,000 small business owners as clients

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Igor Senra and Leonardo Mendes co-founded one of the first online payment solution startups in Brazil in 2007, called Moip (that nowadays belongs to PagSeguro). A year earlier, the Central Bank had started studies for the opening of the acquiring market in Brazil, which was then concentrated on the acquirers of Visa, VisaNet (now Cielo), and Mastercard, RedeCard (now Rede). The opening of this market and the implementation of the so-called four-part model opened up a series of possibilities for the sector’s development in the country. More than a decade later, a new wave of regulatory changes is also expected to benefit the two entrepreneurs’ new fintech, Cora.

“With the creation of SCD (Direct Credit Society, in Brazilian Portuguese), which is the type of business we have today, I think the same movement that happened in the acquiring market will happen in the traditional financial industry, with banks. We are here trying to grab our piece in this change of axis that is going to happen”, said Senra in an interview with LABS. Another important change for Cora’s business, which debuts later this month, is the first phase of open banking, which will help the fintech to further expand its portfolio of partners and services.

Senra and Mendes launched Cora this year, with a not so simple mission: to be “the bank of small businesses”. Small companies caught the attention of the two entrepreneurs back at Moip’s time. “When we founded Moip, we had no intention of saying that the company would change the world. We wanted to copy PayPal. It was by working on Moip that we started building (the business) with the small entrepreneur and we found out how much they are important for the economy. It was the “aha” moment when we realized that we were not there to copy PayPal, but for the small entrepreneur, we had several success stories “, Senra recalled. 

READ ALSO: Brazilian Central Bank raises the bar for payment services

He says he didn’t want to sell Moip, but he did because one of the partners needed the money. The startup was sold in 2016 to Wirecard, becoming a subsidiary of the German company, and only this year was acquired by PagSeguro. Senra and Mendes were still at the head of the company until 2018, when Wirecard decided to change the focus of Moip from small businesses to large ones. That’s when the co-founders decided to leave the startup behind. 

After Moip, Senra and Mendes wanted a business that would follow the UN Sustainable Development Goals. “If we could make our client grow in a sustainable way for 10 years and change the dynamics of Brazil’s financial infrastructure, we could change the country’s GDP per capita ratio, which is US$ 15,000 per person to $ 21,000 per person.”

Igor Senra, cofounder at Cora. Photo: Cora/Courtesy

Cora kicked off in December 2019, when the newly created startup raised US$ 10 million in a Seed round of Kaszek Ventures and Ribbit Capital. If for many companies the coronavirus pandemic was the time to rethink the business, Cora was born with the DNA of startups that challenge the crisis. The fintech operated in a closed beta version until the beginning of the pandemic. The real operation started in May, when Brazil registered 500 thousand infected people and strict measures of isolation and remote work. 

“All of this (the company) was done remotely, knowing that many of the customers are going through difficult situations. We took the right product, which helps the entrepreneur to have less costs, to look at the company’s cash flow and the way they manage the business, “said Senra.

Senra said that the reasons that led to Cora’s foundation became more important with the COVID-19 pandemic.” Digitization is an inevitable force. If that was true before the pandemic, then after the pandemic it is 50 times more true. Everyone wants a cheaper solution. And people want a product that is simple and helps in running the business.”

So far, Cora has worked to have a consolidated product and guarantee the Central Bank’s SCD license. The Fintech offers a digital account with no fees for small and medium enterprises in a free app, and launched in October a debit card with Visa, which should enable the credit function also in the coming months.

Although the card receives a share of the transaction, Cora still does not make significant revenue, since the application is free. The only fee charged to Cora’s account holders is for withdrawals in the Banco24horas network, which costs BRL 6.50 per withdrawal. 

The idea is that through Cora’s platform, which offers financial management tools and access to Cora’s partner companies, and the new card, entrepreneurs will be able to properly separate their personal expenses from the business operation – something that is still a challenge for most small Brazilian entrepreneurs.

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Simplifying business management is also helping to prevent fraud. At Moip, Senra and Mendes were victims of an internal fraud of BRL 500 thousand, that could have escalated and broken the company if it had not been discovered. The reason was a lack of division of roles in the finance department. 

At the time, the company escalated quickly and the tasks of launch division, payment, and reconciliation (barriers to fraud) that were previously executed by Senra and two other people, ended up being delegated to just one employee, who, in the middle of the 20 thousand Daily TEDs (a type of bank transfer, in Brazilian Portuguese), withdrew a percentage for his personal account. 

The experience helped Senra to identify fraud patterns among other clients still at Moip and help them solve the problem before losses.

READ ALSO: Brazilian PagSeguro PagBank reports BRL 45 billion in TPV in Q3

Open banking to increase the number of Cora’s partners

Cora is also betting on the new regulation of open banking in Brazil – which will allow customers to share bank data with their authorization – in order to grow. With this data sharing, Cora’s platform will attract more partners, and with that, offer more services to its customers. 

Among the current partners of Cora are accounting solution companies such as Agilize, AccountBank, Qipu and Conube, and financial management software such as Ativy, Uno ERP, Nimbly, MarketUp, ConnectPlug, Mei Grátis, Granatum Financial ERP and AppelSoft, which reduce the possibility of error and fraud in the management of small businesses. “I think that everyone wants the back office story with the financial well organized. But nobody wants to have that job. Usually, it is necessary to have duplicate activities to have a minimum of security. In these partnerships, we are connected with management and accounting software companies. We operate as if we were the maestro, just making it happen,” he explains. When the transaction is released in the management software, this information goes to Cora, and the transaction is already computed at the fintech. Then, the management system gets to know in real-time and this same information is delivered to the accounting system. “We can give the security without rework. Our goal is to solve this before and not have this [fraud] problem anymore”.  

With 20 thousand companies as clients and a goal to reach the end of the year with twice that, Cora has now just over 60 employees and about 20 open positions.

Translated by Anna Lima