A year ago, Bogota-based fintech Minka and ACH Colombia, a company responsible for bank-to-bank operations in the country, launched Transfiya, Colombia’s real-time transfer system, in a public beta. Unlike what happened with Mexico‘s CoDi and Brazil‘s PIX, where the idea was born based on a Central Bank structure and regulation, Transfiya emerged from a private arrangement and is attracting a string of financial companies interested in building new products and services upon a common structure and protocol for instant electronic payments. Boosted by the COVID-19 pandemic, Transfiya reached 1.7 million transactions and 450,000 active users. These figures are still far behind the system’s potential.
For 2021, Minka’s main goal is to make Transfiya the Colombians’ number one option for payments and transfers. This is challenging for a country where almost 30% of the adult population don’t have or don’t use a bank account, and more than 85% of transactions are made in cash. In an interview with LABS, Minka’s CEO, Domagoj Rozic, said that, in the long run, the system could boost financial inclusion in the country like nothing before.
As it happened in many countries, the COVID-19 pandemic helped speed up the adoption of electronic payments in Colombia, mainly because of the government’s subsidies to mitigate the social distance measures’ negative economic effects. Around 370,000 transfers with government subsidies were made via Transfiya through traditional bank accounts (Bancolombia, Davivienda, Banco Caja Social, Banco Av Villas, Serfinanza, Itaú, and Coopcentral) and digital wallets (MOVii, Daviplata, and Nequi) already integrated into the system.
Many Colombians are learning how to use these companies’ services. To PaymentsSource, a news website focused on payments, Movii’s CEO, Hernando Rubio, said that the number of new accounts opened rose from 1,000 a day before the pandemic to 8,000 a day September last year.
According to the latest report by Banca de las Oportunidades, a body linked to Colombia’s National Planning Department, emergency aid and VAT compensation programs played a fundamental role in the progress observed in the indicators of access and use of financial products. In the first half of 2020, 31 million adults (85.9% of the country’s total population) had access to at least one deposit or credit financial product.
How does Transfiya, Colombia’s real-time payment system, work?
Transfiya operates 24/7, providing up to 4 free transfers of up to COP 250,000 (around $65) per day to recipients’ mobile phone numbers. According to Minka, COP 202.8 billion (almost $57 million) has been processed by the system until last week. Soon, says Rozic, these numbers will be available on Transfiya’s webpage on a daily basis.
Ten banks and fintech startups are currently integrated into the system and counting – and another 7-10 companies in the pipeline to be integrated in the next months, which will also mark the full launch of Transfiya.
The already integrated institutions account for about 70% of the Colombian market. But only a small portion of these companies’ customers use Transfiya. Rozic believes that more people will use the system if Transfiya outreach campaigns are stepped up (which is happening now in February) and if more features are offered.
The system can currently be used for transfers between individuals, and between individuals and small merchants. Business-to-business payments (mostly payment requests), micropayments (between individuals and small businesses, such as mom-and-pop shops), and QR Codes (which is how Colombians will be able to pay utility bills, like water) are among the platform’s next steps for 2021.
“As it was built up from scratch, the platform is use-case agnostic, which means that we can do distribution, and collection solutions of all kinds and that partner banks can reuse the connectivity they have [for other services]. The other important aspect [of the system] is that it works in the way of a stable coin. Banks are depositing money in the Central bank; they have this token solution that they are using to interact between them, and who operates this solution is ACH Colombia, ” explains Rozic.
The differences between Brazil’s PIX and Colombia’s Transfiya
Minka’s CEO says that the main difference between the instant payments systems in Brazil (PIX) and in Colombia (Transfiya) “is that the [system’s] clearing house in Colombia is private, while in Brazil this operation is done by the Central Bank itself. ACH Colombia is basically an association of all the banks. [Colombia’s] Central Bank is only in charge of high-value payments; low-level payments are operated by ACH Colombia,” details Rozic.
Another difference has to do with how revolutionary the solution is in each country. In Brazil, both individuals and companies could already make transfers between themselves: free of charge (when between customers of the same bank) or at a fee (when customers of different financial institutions). These transfers, however, can be made only on business days, or from one day to another (DOC) or on the same day within bank hours (TED). The great advantage of PIX is that it is free, works 24/7, every day, and requires just one piece of data to happen: the so-called PIX key can be the person’s taxpayer identification (CPF, in the acronym in Portuguese), cell phone number or email address.
In Colombia, in addition to a multitude of data as basic requirement, transfers between individuals or companies are very expensive ($2-5 per transaction) and time consuming (it take two to three days). “So, without Transfiya, it was almost impossible to compete with cash.”
Another basic difference is how transactions are made. At PIX, the keys are pre-registered in the customer’s banks or fintechs. As there are three possible keys, each user can receive PIX transactions in a maximum of three accounts. The key he or she informs is what will define the institutions to where the money goes. When entering the key informed in the bank’s app, the customer data immediately appears. Sending is instantaneous.
In Transfiya, the user types the person’s phone number to whom he or she wants to transfer the money. In turn, the recipient must accept the transfer and indicate which institution he or she wants to receive the money. If the person does not accept the transfer within 24 hours, the money goes back to the sender.
What is the same is the will of replacing money and see electronic transactions grow.
Minka wants to take its real-time payments solution to more Latin American countries
Minka’s protocol and specifications for Colombia turned out to be an export-quality solution. The Bogota-based fintech wants to offer its blockchain-based fund system to other Central Banks and ACH (Automated Clearing House) operators in Latin America. “Such a platform is beneficial to countries with high usage of cash and very fragmented financial services market. That’s the case of most Latin American countries, except for Brazil. We’re already talking with financial institutions from the Dominican Republic and Bolivia. After our neighbors, we’ll work through partners to build a network throughout the region, aiming at markets such as Mexico and Argentina too,” says Rozic.
In addition to the clearing transaction core, which is powering the ACH Colombia and is internally called Ledger, Minka will launch its integration platform, called Bridge, separately this year. The idea is to have this component that simplifies integration offered not only to financial institutions to enterprises and merchants of all types. Also, this year, Minka is further developing its ID mapping solution, which allows money to be transferred through mobile numbers in Colombia.
“All these products are like ‘Lego’ building blocks that can be used to build different kinds of solutions”. Most of the technology is built in-house, but some partners are helping in this development, such as ACH Colombia, Google, infobip, and Mastercard (this last one also an investor in the fintech). To put all these plans in motion, Minka is raising its second investment round, to be announced within the next 60 days. The last funding round was led by the New York-based fund FinTech Collective, with the participation of Collaborative Fund, Colle Capital Fund, and Mastercard. Minka also received a grant from the German development bank DEG. “This was 2019, so we are just in the process of closing another round,” stresses Rozic.
Minka and ACH Colombia are also testing WhatsApp integration to enable users of the messaging app to send money to each other via Transfiya. In June, Facebook‘s app was launched in Brazil with the same feature, under the name WhatsApp Pay, but the country’s Central Bank suspended the service “due to possible risks to the Brazilian Payment System (SPB).” Behind the scenes, what was clear is that the Brazilian authority did not want a company offering an instant payment solution outside the rules of the new system, which debuted in November. The expectation now is that WhatsApp Pay will be authorized in the country until June, already integrated into the PIX.