Business

Brazilian UME snags $10 million to boost its Buy Now Pay Later solution across the country

UME grants credit to low-income consumers who don’t have a bank account or access to traditional credit, through retailers’ points of sale

Founding partners of the Brazilian fintech UME — Marco Cristo, Berthier Ribeiro, Theo Ramalho and Márcio Palheta, UME's founding partners. Photo: Courtesy.

LABS

04.May.2022 18:30 BRT
UPDATED 18:37 BRT

UME, a Brazilian fintech focused on Buy Now Pay Later solutions, closed a $10 million (about BRL 56 million) funding round. The investment round consists of $5.5 million in equity, co-led by Silicon Valley-based fund NFX and the Brazilian VC Canary, and followed by BigBets and Clocktower Ventures. And $4.5 million in debt from undisclosed investors.

Founded in 2018, UME grants credit to low-income consumers who don’t have a bank account or access to traditional credit, through retailers’ points of sale. Fintech operates mainly in Northern Brazil, an underserved region that lacks technological financial solutions. The fintech currently partners with more than 50 retail chains, making its BNPL solution available in more than 250 stores. Last year, UME claims to have granted credit to more than 40,000 customers and projects to reach 220,000 users this year.

With the newly raised capital, the company plans to invest in its national expansion.

UME’s business model is inspired by companies like Australia’s Afterpay, recently bought by Square for $29 billion, and Sweden’s Klarna, valued at $31 billion. BNPL is a payment method similar to the so-called “crediário”, a popular type of installment plan in Brazil, but, 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.

UME’s BNPL solution enables stores to grant credit to leverage their sales, while the fintech is responsible for the entire customer relationship, including credit analysis and billing. The credit risk analysis can be done in a few minutes through the UME app or at partner stores, requiring only a cell phone and a photo ID.

Ume’s credit analysis process takes about three minutes (much less than the 20 to 25 minutes that traditional players take to do the same). That’s because fintech has developed a proprietary neural network that crosses data and emphasizes consumer behavior. Between 25% and 30% of Ume’s customer base has a low credit score but still manages to access credit through the startup.

“Our mission is to provide more accessible credit through the digitization of payment methods in Latin America. It doesn’t matter if our client is buying at the physical store or e-commerce, at the supermarket, or at the building materials store, we will be present at all moments of their shopping journey providing access to a simple, transparent and inclusive payment method” says Berthier Ribeiro, co-founder and CEO of UME.