As Rappi expanded the menu of services it offered across Latin America, one thing the super app lacked was a commensurate level of financial convenience, said co-founder Juan Pablo Ortega.
Ortega spoke with LendIt’s Todd Anderson at LendIt Fintech LatAm 2021, which took place December 7-8 in Miami, Florida. The two discussed democratizing fintech through convenience.
Rappi takes pride in providing whatever people want at all times, Ortega began. With such an ambitious goal, it makes sense that sooner or later the business will look to financial services to increase that convenience even further.
The process started with Rappi Pay, an instant, free method for users to send money to each other. Then there was a credit card, with developing banking services.
“We want to be able to offer all the financial services that a bank can offer, but 100% digital, and also using our delivery network,” said Ortega.
Rappi’s wide penetration brings many conveniences, and in the case of his credit card, a physical copy can be delivered almost anywhere within 40 minutes after the applicant has spent less than two minutes applying online.
Ortega sees three distinct user groups within the Raqppi ecosystem. The first are end users, most of whom have financial services. Younger customers may not have theirs but have access to their parents’ card.
The second is Rappi’s messaging network. Most are unbanked, with their Rappi account the first financial service many have ever had. The last group is made up of a wide variety of traders who do not have access to financial services.
Lack of options
Even though many clients have financial services, they have found these options lacking, Ortega said.
“Many have a bank account, but they don’t think they have the services they are looking for,” he explained. “Even though they have a bank, they are still underserved.”
Rappi serves a unique customer network that has a much higher mobile phone penetration rate than the use of financial services. Does this allow the user to bring in options instead of waiting for them to look for them?
You still have to do the work, explained Ortega. Start by making the process of opening a bank account as easy as opening a social media account, which most people have.
These accounts should be transparent, with no hidden charges or fine print. Then, make the services easy to use. Opening a bank account can take a long time, with applicants then having to come back four days later to collect a physical card.
Rappi initially wanted to build his network on his own, but realized that this would take a long time, so they turned to a series of partnerships as they did with Peru’s Interbank. Some are similar to joint ventures, while Rappi operates under the license of the partner in other areas. Sometimes Rappi has his own license.
The strategy has three phases. It starts with the desire to offer financial services as quickly as possible. Then Rappi uses its own technology in many processes but under partner license. Ultimately, they will operate under their own license.
“What we’re doing and what we’re seeing is that having our own license and our own technologies allows us to build the process the way the customer wants,” Ortega said.
Own technology allows customization
He said that it is certainly better to build on an existing system which is different in each country. Rappi has the technology to accomplish what traditional banks have to do manually on its back end.
Many consumers are used to the Netflix and Amazon experience. Do they expect the same level of convenience from financial services? A better comparison is social media, suggested Ortega. Before social media, it took days or weeks to send someone a photo. Then with the email, maybe someone would open their account today to find it. Now, with instant messaging, the expectations have increased.
“If I can send a message and a picture, and it gets immediately received around the world, why can’t I send two or three dollars?” ” He asked. “I think social media… is putting pressure to improve our services. “
The loan is the easiest way for consumers to enter the financial system and comes with the least amount of friction, Ortega said. Once you trust that user, you work to get them to trust you by offering them a range of possible services.
As the convenience of services like Rappi attracts more and more users, their creditworthiness can be better assessed by the data they generate in the app, Ortega said.
“We find that by using this consumer behavior, this data on consumer spending, we are able to better predict whether that person will be a good payer,” he said.
Ortega said that when a person applies for their first credit card, businesses should look for reliable alternative data sources to assess the request. It can be as unique as the type of phone they are using. If the borrower is in arrears, can their service be interrupted?
Inclusion will help the system
“The reality is that if we can bring more inclusion into the credit bureau, the whole ecosystem grows,” Ortega said.
Ortega concluded by sharing his thoughts on a few topics. He said there was substantial digital migration at the start of the pandemic before people started using money more frequently. The result is that fewer people will use cash than before COVID-19.
More and more people are comfortable with digital finance, he added. Since launching his credit card in February, Rappi has received 1.8 million requests in Mexico alone.
Looking ahead, Rappi will continue to seek banking licenses in the countries where it operates, with good news for Colombians coming in the first quarter of 2022. Ortega is also keeping a close eye on cryptocurrencies.
“I think crypto is changing the way a lot of people do things,” he concluded. “I think crypto is changing the way we send money, and we are looking for opportunities to engage our users in crypto.”
Tony Zerucha is a longtime contributor to the fintech and alt-fi spaces. A double nominee LendIt Journalist of the Year and winner in 2018, Tony has written over 2,000 original articles on blockchain, peer-to-peer lending, crowdfunding, and emerging technologies over the past seven years. He has moderated panels at LendIt, the CfPA Summit and DECENT’s Unchained, a blockchain exhibition in Hong Kong.