The fintech’s hope is to consolidate the ground it has gained through its expansion across Mexico and then Colombia with an eye on Latin America generally. It plans to do this by investing its new dosh on potentiating the existing competitive advantages in its current business model.
The model in question consists in pooling individual, as well as small and medium-sized enterprise (SME) debt in order to reduce overall interest rates and afford credit-lines to folks who wouldn’t usually have access to them.
The strategy certainly seems to have worked rather well. The scaleup claims that in the past eight years it has handed out over US$1 billion in low-default-rate loans.
That certainly shows a good use of—as AlphaCredit’s co-founder and co-director, Augusto Álvarez, has said—the deployment of “technology and robust sources of financing, allowing us to grow exponentially. All while we have been able to promote the economic development of people who wouldn’t often get this type of credit.”
The exception that proves the rule… for now
They’re at it again. Venture capitalists (VCs) generally, and SoftBank specifically, have had an eventful first month of 2020.
Take SoftBank-backed Rappi. It saw a turbulent few weeks and went on to sack six percent of its staff. Other rough starts to the year followed on the part of Lime and Uber who retreated (or were kicked out) from various parts of the region.
A crucial question quickly arose: is the ultra-aggressive expansion strategy actually a trap?
Well, fintech disruptors in Latin America don’t seem to abide by these qualms. Indeed, both regional and global VC funds have been doubling down on their bets for this sector.
Makes sense in a poorly financially attended, largely unbanked region like Latam.
However, read closely and you’ll see there is an important caveat set out in today’s AlphaCredit investment: the money will be used for technological and systemic consolidation.
Sounds strikingly like investment in automatization and into efficiency measures to me. Could this, in fact, be the new norm? Series A for crazy-fast growth. Series B for sober consolidation.
Either way, a brave new world lies before us.
Wanna hear more? We recommend you listen to the following podcast episode: Mientras que Grow Mobility tiene problemas, Sofbank reaparece y iFood avanza firme hacia el futuro. You can find the time stamp available in the description.
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