PayHop fintech BNPL — Eduardo Rossi (CEO) and Arthur Fontana (CTO), co-founders at PayHop. Photo: Courtesy

Brazilian PayHop nabs BRL 11.5 million to scale up a BNPL solution that uses card receivables as collateral

With only seven months, PayHop secured an investment round led by credit bureau Serasa Experian to boost a Buy Now Pay Later solution focused on SMBs.

Carolina Pompeo

16.Feb.2022 09:00 BRT
UPDATED 15:51 BRT

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Buy Now Pay Later (BNPL) solutions aimed at improving access to shopping, especially those geared toward small and medium-sized businesses, are the new “apple of the eye” for the Brazilian market. Following this trend, Experian Ventures, the venture capital arm of the Latin America credit bureau Serasa Experian, led a BRL 11.5 million Seed round in the newcomer PayHop, a fintech that allows retailers to get credit using card receivables as collateral. DOMO Invest and Citrino Gestão also participated in the funding.

Founded by Eduardo Rossi and Arthur Fontana, CEO and CTO of the fintech, respectively, PayHop has benefited from a recent change undertaken by Brazil‘s Central Bank in the rules for operating the registration and trading of card receivables. According to the new rule, all card transactions are registered in a unified central office, which certifies the existence of receivables, allowing the creditor to use these future payments as collateral to obtain cheaper credit. Previously, retailers in need of working capital had to agree to higher rates from banks or acquirers to anticipate receivables.

“Every regulatory change brings opportunities. Our value proposition is, instead of offering a more competitive receivables anticipation product, to bring the same input, the card receivable from the retailer, to the B2B chain. PayHop’s core business is to reduce default risk by using the retailer’s card receivable as collateral to pay the supplier,” Fontana said in an interview with LABS.

PayHop built a platform to serve both SMBs and suppliers, through which the retailer can use its card receivables as collateral and thus access credit with suppliers, reducing the costs of anticipation with banks or acquires. To reach these retailers, Payhop partners with suppliers, who offer the fintech solution as a payment option for those customers who, for many different reasons, are not able to make an installment purchase.

“The retailer puts up their receivables as collateral, but who will help us do the commercial push for the retailer to join the service is the partner supplier. Our go-to-market is the supplier because he can’t sell on credit to all his clients. The retailer gets an incentive from his supplier to use the receivable as collateral to pay for the purchase in more installments and better conditions. It is a BNPL solution for the retailer, and a guarantee of payment for the supplier,” explained Rossi.

The market targeted by PayHop is huge: according to the founders, the Brazilian card market reached more than BRL 2.5 trillion in 2021, of which BRL 1.6 trillion was in credit card transactions. Still, there are a large number of suppliers struggling to sell on credit and retailers who do not have access to credit.

“A major issue for retailers is the risk of default analysis. In Brazil we have a low level of access to credit in this segment. PayHop’s solution addresses precisely this need, allowing the supplier to sell more to its retail customers and with lower default risk on installment sales,” said Fabrini Fontes, CIO of Serasa Experian.

Still a newcomer in the market, PayHop is putting its efforts into product push and will use the funding round to grow its commercial, product, and technology team. The fintech‘s preference is for customers in segments where there is a greater recurrence of installment payments and the average ticket for transactions made via PayHop platform is BRL 3,000. The fintech does not disclose its numbers, such as growth, revenues or volume traded in these first months but says it is working to reach the end of the year with more than 200 suppliers partners.

According to Fontana, the partnership with investors, especially with Serasa, will ease the access to tens of thousands of suppliers with whom the institution already has a strong relationship for PayHop to prospect and offer its product.