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Contxto – We cover a lot of fintech excitement at Contxto. Every day there seems to be another Latin American startup making headlines based on masterfully combining finance and technology for enhanced user lives.
Today’s latest comes from Brazilian fintech Creditas. The SoftBank-backed startup recently announced that it received over 800,000 applications from January to June of this year.
From these 800,000 loan requests, Brazilians accumulatively applied for over R$20 billion. This translates to a 230 percent increase from the same period in 2018. In particular, 134 percent used vehicles as loan collateral and 96 percent used real estate. So far, the model has proven to be successful with a default rate of less than 2 percent.
“We are very happy with this result,” said Fabio Zveibil, vice president of Business Development at Creditas. “The figures show that there is a great demand in Brazil for quality credit with low rates and longer terms. We will continue to work hard to help more and more Brazilians to carry out their life projects.”
Most of these requests were for refinancing. That’s to say, customers pursued loans with smaller interest rates to cover larger debts. On average in Brazil, monthly interest rates for overdrafts and credit cards is over 13 percent. With Creditas, though, it charges less than 2 percent interest for vehicle and property-based loans.
This isn’t the first time we have discussed Creditas. Earlier this month, the fintech raised around US$200 million from the monolithic SoftBank, raising its valuation to US$700 million post-money. Not quite a unicorn but almost. Naturally, the company now expects to reach 1,000 employees and triple revenue by the end of the year.
Fintech is a growing industry in Brazil, made evident by major contenders like Nubank expanding throughout the region. Even in Latin America, Mexico, Chile, as well as Argentina, are proving to have booming potential.
With smaller fintechs such as WEEL and Conta Azul also contending in the market, the fintech ecosystem is pretty diverse in Brazil. Over time, Brazilian fintechs have attracted millions of customers.
In effect, the Brazilian financial system is more accessible than it has ever been before. As more members of the “unbanked” population reach financial freedom, the more we realize that de-bureaucratization does yield some positive results.
Further proving the need, more than 60 million Brazilians don’t have bank accounts due to the fees and bureaucracy, according to Nubank chief executive David Vélez.
Many fintechs are also going through legal means to become authorized financial groups, at least that what Creditas did at the beginning of the year. Brazil’s Central Bank authorized the startup to operation without the intermediary of banks as a Direct Credit Society.
Moving forward, this means that Creditas is now a full-fledged autonomous financial entity. In other words, there are very few things holding it back from becoming Brazil’s next unicorn.