During the last decade, Latin America had a boom of B2C fintech companies, with the rise of neobanks, e-wallets, and lending platforms. But right now it’s time for the B2B’s fintech infrastructure. That’s the mindset of Gastón Irigoyen, co-founder, and CEO of Pomelo, a three-month-old fintech challenger in Argentina that announced a $9 million Seed round this week.
“All these companies (Nubank, Creditas, Mercado Pago) were creative for customers, but they were creative on top of legacy and old infrastructure; that’s highly fragmented in every market. So now we want to work on that and build one unique fintech infrastructure for all Latin America,” he told LABS in an interview.
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The startup is hiring 60 people in Argentina, Brazil, and Mexico but wants to go beyond these three countries since it is no longer thinking in offices. “We will have our legal entities, but we think of a post-pandemic company. So we are trying to build a company for the world as we know it now in 2021. People work remotely, asynchronously. We are just looking for the best people in fintech, the best people in technology. That’s the kind of culture that we want to build.”
Most of the raised funds are going to hiring and product development. Pomelo’s main goal is to have its entire team in place and its first customers in all three markets by the end of the year. It claims to have customers on the radar, but it will not announce them until they go live.
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Irigoyen has been working with technology for 15 years. He was Google‘s employee number 5 for Spanish-speaking Latin America and now is a fourth-time founder, with two exits (one in TripAdvisor).
He launched and was former CEO at Naranja X (a neobank linked to Argentina‘s large banking group Galicia) in 2019. Naranja X’s operates as a wallet, and a bank, a mix of what Brazil‘s Nubank and RecargaPay do since it recently was granted a banking license from Argentina’s Central Bank.
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But then, he saw opportunities around fintech infrastructure and decided to launch Pomelo with two co-founders, Hernan Corral (CPO), which was Naranja X‘s exec and previously spent 12 years building Mercado Pago‘s product for Latin America, and Juan Fantoni (CCO), former director of fintech at Mastercard.
“We did it essentially to solve the problems that companies have when trying to be a fintech, because you have to spend a lot of time working on infrastructure, issuing cards, developing connections with local financial systems, dealing with regulation, and also it’s very different in every market. If you are in Argentina and want to operate in Brazil and Mexico, you will have to do the same thing repeatedly. That takes many years, a lot of money, and huge teams.”
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Pomelo’s idea is now backed with the new Seed round led by monashees and Index Ventures, with participation from QED’s Fontes, SciFi VC, Latitud, 20VC, Future Positive, Addition, and FJ Labs, and includes Angela Strange, from Andreessen Horowitz.
Angela Strange’s thesis: embedded finance
According to to him, this is happening because investors see a massive opportunity to replicate in the region similar things to which they have seen in the more developed economies.
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Latin America has 650 million people and nearly half of the population is still unbanked. The region has a huge case for cryptocurrency, and new open banking regulations, that added to a lot of liquidity in the world, with the issuing and the money printing by the Central Banks, makes Latin America an essential place for business, from Irigoyen’s point of view.
“We will see more companies growing, developing, and becoming large fintechs in Latin America. I think that’s going to be mostly around crypto, open banking, and infrastructure. In the last few years, neobanks, lending platforms, and e-wallets emerged. Now it’s time for the crypto wallet; it’s time for the infrastructure players and open banking.”
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Open banking itself is a big deal for LatAm’s regulation, as countries seek to adapt to what’s happening in the world and what users want, like freedom, data portability, allowance to invest and save in any currency. Besides remittances freedom, as COVID-19 pandemic pushed cross-border payments due to remote work.
Irigoyen believes that the biggest trend will be the so-called embedded finance. It means that every company will be a fintech company: incumbents, technology companies, travel, real estate, all of them will have a fintech within themselves. This thesis has been pushed by Angela Strange, a16z‘s investor.
“That’s exactly what we are going to do. We are going to allow every company to be a fintech by allowing them to have a card, a wallet, and compliant onboarding processes, to be connected with local financial systems in every market.”