After raising its first foreign investment, Brazil‘s QI Tech announced this Thursday the acquisition of Zaig. The deal, which involves payment in cash and shares, did not have its value disclosed. With the acquisition, QI Tech starts offering credit as a service.
QI Tech was the first Brazilian fintech to receive a license from the Central Bank to operate as an SCD (Direct Credit Society), in 2018. This allowed the startup to develop credit operations. The fintech works with financial infrastructure, allowing any company, retail, or even other fintechs to offer credit. It is different from what Hash and Zoop do in Brazil, offering only payment solutions, not credit, as they have licenses to operate as payment institutions.
Telefonica Vivo is one of the startup‘s clients. Vivo can both provide mobile phone service and also open an account, pay bills and grant credit, through QI Tech. Fintechs that want to make peer-to-peer lending but cannot lend the money directly can also use QI Tech’s API to offer credit, in a B2B2C model.
In an interview with LABS, Pedro Mac Dowell, founder, and CEO of QI Tech, explains that it is the fintech client who carries the risk and approves the credit for the user. QI Tech is in charge of preparing a term for the concession of the credit operation, but the client company is the one that originates it. QI Tech does this process in seconds, “24/7,” according to Dowell.
“We bring the possibility for anyone to build a ‘bank’,” says Dowell, in the sense that QI Tech allows loans between people through the platform, without human interaction. The fintech also works with the cardless lending model, what is now called BNPL (Buy Now Pay Later), in which the customer can take credit and pay in multiple slips.
QI Tech earns in the transaction value commission, a percentage – undisclosed – of the volume transacted in the month for new credit issues. The transactional cost of Brazil‘s instant payments system PIX and Brazilian banking slips ‘boleto’ also goes to the startup.
The company’s first transaction was in 2019 and since then QI Tech has moved more than BRL 5.5 billion in credit transactions, of which BRL 200 million was in 2019, BRL 1.2 billion in 2020, and BRL 4.2 billion in 2021.
Since its inception, the founding partners of QI Tech have invested with equity in the company. But last month, the fintech received a BRL 270 million round from the Singapore Sovereign Wealth Fund (GIC). “We did the round precisely to accelerate our growth inorganically [through acquisitions]. We were already growing, we are a financially efficient company, we generate cash, we generate profit. We did not need to have made a round of investment, but we did exactly to accelerate through acquisitions,” said Marcelo Bentivoglio, partner at QI Tech.
Bentivoglio states that “possibly two more acquisitions can still be made” with the amount raised by the Singapore fund. “We are looking at the market as a whole, [we can acquire] even bigger companies than QI, we don’t rule out the possibility of doing a second round to make up capital to make a bigger acquisition.”
With the acquisition of Zaig, QI Tech wants to bring in customer onboarding and fraud prevention, with authentication technology. “Within that acquisition package also comes the idea of credit building, in a one-stop-shop. In one place we have customer onboarding, customer trustworthiness with regards to being authenticated, and then a credit review. I don’t take the risk, the fintech client does, but I can give them the whole structure so they can develop. I give you the chassis of the car, you develop the whole car”, Dowell exemplifies.
QI Tech serves 110 clients and Zaig has 20 clients. “There is some cool cross-selling between the two companies. Zaig comes to be an anti-fraud line of business within QI,” adds Bentivoglio.
The acquisitions come as a complement to business lines that QI does not yet operate, including the purchase of securities. Generally, companies that provide credit, such as Creditas, raise the amount to provide credit in Brazil via FIDCs (Credit Rights Investment Funds) to load the credit portfolio originated by the fintech.
These fintechs issue a FIDC, their own vehicle, to be able to raise funds from investors and then be able to use that credit portfolio. These vehicles can only be managed by a brokerage firm, which does the custody (is legally responsible for the fund) and administration of the FIDC. Thus, QI Tech also looks at companies that can operate as these financial houses for the administration of FIDCs digitally.
That’s because the startup plans to do an IPO in 2024 on Nasdaq, and with the acquisitions, QI Tech wants to arrive for the initial public offering as a credit-engineered anti-fraud company with an investment vehicle custody and administration package.
“We have a lot of things to do within Brazil yet. We don’t rule out international expansion in 2022, it’s not in the plans today, but our plans have been changing very fast because we have been growing very fast,” says Bentivoglio.
There are no concrete plans for internationalization, but there is demand from clients, according to the executive. Dowell also does not rule out buying a financial institution in Mexico to prove the hypothesis that QI Tech’s technology can be replicated in Latin America.