Business

ADDI raises $200 million in a round that mixes venture and debt capital

The venture capital part was led by GIC and followed by SoftBank's fund for Latin America, while the debt capital agreement was signed with Goldman Sachs and Architect

Colombian ADDI raises $75 million to scale its Buy Now Pay Later solution in Brazil — ADDI's co-founders Santiago Suarez, Elmer Ortega and Daniel Vallejo. Photo: ADDI/Courtesy

LABS

20.Dec.2021 14:16 BRT
UPDATED 21.Dec.2021 15:41 BRT

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Four months after the extension of its Series B round, Colombian fintech ADDI, specializing in microcredit for online purchases, has just announced a new round of investments. This time, the company raised $200 million (40% in equity and 60% in debt capital) to continue accelerating its expansion in Latin America (more specifically Colombia, Brazil, and, next year, Mexico).

According to Bloomberg, the venture capital part was led by Singapore’s sovereign wealth fund GIC and followed by SoftBank‘s fund for Latin America, while the debt financing agreement was signed with Goldman Sachs and Architect, a manager that works with the so-called debt venture and had already made previous agreements with the fintech.

Founded in 2018 by Daniel Vallejo, Santiago Suarez, and Elmer Ortega, ADDI offers a solution known as Buy Now, Pay Later (BNPL) for those who do not have access to credit cards or are not able to make payments using this method. The fintech has developed a B2B2C product, in which it enters into partnerships with online and physical stores, which now offer ADDI as a payment option to its customers. When a purchase is paid with ADDI’s solution, the partner store receives the value of the sale within one week, while the customer can pay the amount due in up to three interest-free installments.

In an interview with LABS in September, the company informed that it had already processed around 20,000 transactions with an average ticket of BRL 350 in the country. The company planned to close the year with 400 partner storekeepers (it has already surpassed this mark, according to Brazil Journal) and reach the BRL 1 billion transacted in 2022. ADDI’s solution is also available through partners, for example, to merchants who use Nuvemshop or VTEX.

Brazil is considered the main market for fintech. With an eye on this business potential, ADDI started offering end users interest-free payment via PIX (Brazil‘s instant payment system launched in November 2020), to replace the traditional bank slip called boleto and plans to improve the BNPL offer by launching an app soon. The company expected to reach 400 partner merchants by the end of this year and hit the BRL 1 billion transacted mark by 2022.

The BNPL phenomenon in Latin America

Unlike a credit card or a line of credit issued by a bank, BNPL lets consumers pay for purchases via short-term loans that most often have no interest fees for shoppers.

These microloans are approved at the time of purchase, and there are two primary ways of borrowing. The first is a point-of-sale loan, in which BNPL provider partners with merchants to offer financing at checkout. The other is an installment plan that lets people buy online and pay for their items in a predetermined number of installments. Both involve a credit-validation step that is typically managed by the BNPL service provider. The loans are frequently interest-free for customers if they are paid on time. For other transactions, an interest charge may be applied upfront.

BNPL service providers make their money on the transaction fees charged to merchants, but in return, merchants benefit from reaching more customers, increased cart conversions, and higher sales volumes. BNPL providers also validate the customer’s ability to pay through their own soft credit check or underwriting process, taking most of the risk of non-payments and fraud of the merchant’s shoulders. The fintech said its merchants have seen their order values double or triple, with similar increases in conversion.