The balance of public payroll loans, a type of personal credit granted to public sector workers in Brazil, is estimated at BRL 400 billion. This in a country that has more than 11.5 million active employees in the Executive, Legislative, and Judiciary, or 17% of the formal employment in the country, according to data from the Institute of Applied Economic Research (IPEA).
It is a high potential and low-risk market but underexplored by startups and fintechs. This was the cue for bxblue, which presents itself as the first payroll-deductible credit marketplace in Brazil that has already generated BRL 500 million in loans.
The public payroll-deductible credit is a low-risk type of personal loan because the payment of the installments is automatically discounted from the paychecks or pensions paid by the Union, states, or municipalities. In other words, the risk of default is almost zero. For this reason, credit conditions are also more attractive, with reduced interest rates and an extended settlement period. Today, according to Gustavo Gorenstein, co-founder of bxblue, 92% of payroll loans are public.
Founded by Gorenstein, Fabrício Buzeto, and Roberto Braga, bxblue connects clients to banks and intermediates the contracting of the payroll-deductible credit. All requirements for obtaining a loan – for example, the applicant’s age, which sphere of government he/she is or was a servant, available credit limit – are defined by the banks, as well as the installment terms and interest rates. What bxblue does is show the customer what options are available and which is best.
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Through its proprietary technology platform, bxblue provides services that allow the customer to compare the payroll loan options available for their profile, the rates practiced by banks, and to finalize the contract digitally, without having to go to the bank (or banks). The startup receives a commission on the value of each loan made through the platform.
“We thought that if we managed to make the process of obtaining a payroll loan more transparent, we would help the bank customer. And if we added a lot of technology, we would help banks to operate better, with lower operational, logistics, and governance costs. The consequence is a cheaper process for the banks and a cheaper product for the customer. We help all the parts ”, explains Gorenstein.
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After being accelerated by Y Combinator, an American seed money startup accelerator launched in March 2005, bxblue developed a payroll-deductible credit API for Banco do Brasil, its first partner bank. At the end of 2019, the “bxblue self-service platform”, as Gorenstein calls it (“The customer enters, compares and contracts by themselves”), was finally launched.
Now today, bxblue operates throughout Brazil and has four partner banks – Banco do Brasil, Financeira BRB, Daycoval, and Cetelem). “If a customer lives in a location where there is only one bank that offers payroll loan, with bxblue the customer will have options and will be able to choose the best product for him or her. Applying technology to make an online, accessible and uncomplicated payroll loan is the biggest thing about bxblue”, says Gorenstein.
In just over four years, bxblue has already brokered BRL 500 million in payroll loans through its platform. The economic crisis caused by the COVID-19 pandemic leveraged fintech’s operations eight times, which attracted investors’ attention.
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In January, bxblue received a round of BRL 38 million in its Series A led by Igah Ventures and following by Iporanga Ventures, FJ Labs, and FundersClub. With this round, fintech has already raised BRL 43.2 million. Bxblue does not disclose its valuation; an estimate made by the Startups website points to something close to BRL 160 million and revenue of BRL 20 million.
Now, bxblue is working to launch two new products in 2021, two new payroll loan operations: refinancing consignable margin and portability of consignable margin from one bank to another. Besides, it wants to expand the service to workers, retirees, and pensioners at the state and municipal levels – currently bxblue serves only workers at the federal level and retired by the INSS – and to exceed the BRL 1 billion mark in loans generated. For now, there are no plans to operate in the private payroll loan market.