Colombia-based Addi raises $65 million to fund its Buy Now Pay Later (BNPL) growth in Latin America

The new funding will be used to grow the fintech's business in Colombia and support its launch in Brazil

Addi's co-founders Santiago Suarez, Daniel Vallejo, and Elmer Ortega. Photo: Courtesy/Addi

26.May.2021 09:31 BRT
UPDATED 11:49 BRT

Addi also announced a strategic partnership with Banco Santander in Colombia;
Addi says it has grown its business over 5 times since the beginning of the year;
The new funding was raised through debt and equity.

Colombia-based Addi announced on Wednesday that is has raised a $65 million round in debt and equity. The new funding will be used to grow the fintech‘s business in Colombia and support its launch in Brazil, where it established an office this year. The startup has its eye on Mexico as well.

The equity $35 million Series B round was led by Union Square Ventures, with participation from 8VC, Monashees’s Opportunity Fund, Citius Capital, Endeavor Catalyst, the Marathon Fund, GGV partner Hans Tung, and former Affirm COO Huey Lin.

Existing investors Andreessen Horowitz, Foundation Capital, Monashees, and Quona Capital also participated in the round. The remaining $30 million fresh debt funding came from Architect Capital.

Addi also announced a strategic partnership with Banco Santander in Colombia, in which they will offer financing for consumer products as a single solution for merchants in the country. The partnership will go live in June.

From POS to BNPL

The fintech was founded in Bogota in 2018 by co-founders Santiago Suarez, Daniel Vallejo, and Elmer Ortega. At that time, Addi was focused on powering e-commerce through making POS (point-of-sale) financing accessible to Latin America‘s merchants and consumers.

Now, Addi has been addressing the so-called Buy Now Pay Later in the region. As LABS has shown, 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 a 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 up front.

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 off the merchant’s shoulders. The fintech said its merchants have seen their order values double or triple, with similar increases in conversion.

“In Colombia and Latin America, most consumers can’t be part of the digital economy. Paying online is incredibly difficult, affordability is limited, and very few folks have a credit card,” said Addi’s co-founder and CEO Santiago Suarez, in a press statement. “We empower merchants and customers and make it possible for them to meet digitally and transact with a fast, fair, and disruptive way of paying.”

Addi says it has grown its business over 5 times since the beginning of the year, and it now has partnerships with hundreds of merchants in Colombia and Brazil, serving thousands of customers a month and powering millions of dollars in purchases (it didn’t disclose the amount). In just two months in Brazil, Addi said it has already partnered with over 50 merchants and is available for any merchant on Nuvemshop or VTEX.