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Contxto – Cash dependency and Latin America are like two peas in a pod. Inseparable. This is a shame. Vast amounts of money and time are wasted on simple operations that could be done with three clicks or less.
Thus, Mexican startup UnDosTres has taken up the challenge. It wants to tackle the big beast of payment digitalization, in order to triumph where so many have failed before. They provide payment solutions for all things digital.
Through the platform, you can pay from cell phone top-ups, gift cards, utility, internet, and streaming services bills, even Covid-19 insurance.
So, why then, is it now teaming up with PayPal and Unicef? And in the middle of the pandemic!
Beyond all the feel-good side, there is a practical side to putting charity at the heart of this burgeoning solution.
Mexico, a death sentence for payment solutions
I often ask myself, “What’s the problem with Latin America? Why isn’t it taking off?”. This. This is the problem with Latam (and Mexico particularly): Corruption, impunity, and poor law enforcement. When put together they mean that some of the most basic pre-existing solutions in the market are unviable here.
And yes, this is a Latam, not a “developing world” problem.
The challenge was also apparent to a team of three Indian entrepreneurs who would go on to found UnDosTres. They came to Mexico and saw that the country wasn’t doing what was already pretty established in their native homeland.
This puzzled Arpit Gupta, one of the founders of UnDosTres. He told me over an interview how the stats and the facts just didn’t add up:
“Only 20 percent of Mexicans have done an online purchase.”
That leaves, according to Gupta’s calculations, a population of over 40 million people who have the means to carry out an online purchase but don’t. Why?
“Credit card fraud.” Turns out the prevalence of this crime is massive in Mexico and it is killing payment solutions.
You see, since the problem is so bad, banks have come up with a simple solution. However, it only caters to their customer base: cash reimbursement returns.
The problem is that returns are almost exclusively to benefit the customer. They make a claim to the bank and the bank reimburses them. Indeed, with the growth of fintech and challenger bank solutions this has become easier than ever.
But this is the death of digital payment platforms, according to Gupta. Even if the bank is happy to reimburse its customers, the company is left out to dry.
It is incredibly difficult to get a refund from a bank for card fraud when the product is not physical. Therefore, the onus is on the payments company to stop the fraud before it even happens. Otherwise, they will most likely never get their money back.
Trust is an asset for UnDosTres
The solution within the solution has been Artificial Intelligence (AI). An extra layer of complex tech needed to make a simple solution work in inhospitable conditions.
UnDosTres has trained its AI to analyze every single transaction and instantly identify any dodgy dealings. Dealings that may have gone on undetected for a while if checked manually.
But, perhaps the most ingenious solution has been the offline one that the company has been applying.
“People don’t trust online solutions,” says Gupta. And, after everything we’ve just talked about, I’m not surprised! So, how is UnDosTres getting customers to onboard onto their solution?
“Trust buys trust” is Gupta’s reply. Therefore, it is his company that takes the first leap of faith. They’ll give their customer MX$10 to MX$20 (US$0.44 to US$ 0.88) on their first purchase. This incentivizes that first, crucial, transaction.
Remember, the solution is catering to a customer base in the middle and lower-middle classes. Gupta estimates that an average electricity bill ranges from between MX$50 to MX$100 (US$2.22 to US$4.44). That’s a tasty 20 percent discount for some folks.
After the first taste of online payment, customers slowly begin to move their transactions online.
The solution is clearly beneficial to the customer. The demographic UnDosTres is working with are the sort of people who will have to walk literal miles to reach a convenience store in order to pay bills for basic necessities. If they can do it online, all the better! The main obstacle is, hence, clearly a trust issue.
But once that challenge is surmounted it takes about two months (that is two rounds of bill payments) for a customer to buy into the platform completely.
“We want to be a digital OXXO” says Gupta—referring to the convenience store of choice to carry out this sort of payment offline.
Charity as business model?
The strategy is working and UnDosTres has conducted millions of transactions and is now profitable after only a few months of operating.
And this has been in the middle of a pandemic, where, as a precautionary measure, they scrapped all their marketing budget.
This is where the startup’s recent partnership may come in handy. Gupta insists that the alliance is about giving back to the community, and rightly so.
It is clear that it works within the company’s ethos around trust-building and solidarity. The company trusts its clients and invites them to take that extra step in order to give to charitable causes that help children in need in Mexico.
In the long run, they are pulling people out of poverty and expanding their own target demographic. But on a more immediate level, it works as brilliant marketing (of the sort they no longer have thanks to Covid-19).
This charitable initiative by UnDosTres helps increase trust in it by putting its name next to two of the most trusted brands in transaction history. On one hand, there’s PayPal, which needs no introduction, and is now synonymous with quick, easy, and trustworthy online payments. And UNICEF, a trusted NGO people are happy to give money to.
Furthermore, this sort of initiative creates an opportunity to generate that coveted “earned coverage”. A useful thing to have when things are running smoothly but there’s nothing to report to the media.
Of course, UnDosTres is doing it for the charity, but hey, the drive caught my attention.