As Rappi grew the menu of services it offered throughout Latin America, one thing the super app was missing was a commensurate level of financial convenience, co-founder Juan Pablo Ortega said.
Ortega spoke with LendIt’s Todd Anderson at LendIt Fintech LatAm 2021, held Dec. 7-8 in Miami, Fla. The two discussed democratizing fintech through convenience.
Rappi prides itself on providing anything people want at any time, Ortega began. With such a lofty aim, it is only logical that sooner or later, the company would look to financial services to increase that convenience even further.
The process began with Rappi Pay, an instant and free method for users to send money to each other. Next was a credit card, with banking services in development.
“We want to be able to offer all of the financial services that a bank can offer, but 100% digital, and using also our delivery network,” Ortega said.
Rappi’s broad penetration brings many conveniences, and in the case of its credit card, a physical copy can be delivered most anywhere within 40 minutes after the applicant spends less than two minutes applying for it online.
Ortega sees three distinct user groups within the Raqppi ecosystem. The first are the end-users, most of whom have financial services. Younger customers may not have their own but do have access to their parents’ cards.
The second is Rappi’s courier network. Most are unbanked, with their Rappi account the first financial service many have ever had. The final group is a wide variety of merchants who do not have financial services access.
Options lacking
Even though many customers have financial services, they found those options lacking, Ortega said.
“Many have a bank account, but they don’t feel 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 displays a much higher rate of mobile phone penetration than the use of financial services. Does that allow the user to bring options instead of waiting for them to seek them out?
You still have to do the work, Mr. Ortega explained. Begin with making the process to open a bank account as easy as it is to open a social media account, which most folks have.
Those accounts must be transparent, with no hidden fees or small print. Then make the services easy to use. A bank account can take a long time to open, with applicants then having to return four days later to pick up a physical card.
Rappi initially wanted to build its network on its own but realized it would take a long time, so they pivoted to a series of partnerships as they have with Peru’s Interbank. Some are similar to joint ventures, while Rappi operates under the partner’s license in other areas. Sometimes Rappi has its own license.
The strategy has three phases. It begins with the desire to offer financial services ASAP. Then Rappi uses its own technology in many processes but under a partner’s license. Eventually, they will operate under their own license.
“What we are accomplishing and what we are seeing is that being able to have our own license and our own technologies enables us to build the process the way the customer wants,” Ortega said.
Own tech allows customization
He offered that it sure beats building on top of a legacy system that is different in every country. Rappi has the technology to accomplish what legacy 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, Ortega suggested. Before social media, it would take days or weeks to mail a picture to someone. Then with e-mail, maybe someone would open their account in a day to find it. Now with instant messaging, the expectations have risen.
“If I can send a message and I can send a picture, and it’s received around the world right away why can’t I send two or three dollars?” He asked. “I think social media…is putting pressure in making our services better.”
Lending is the easiest way for consumers to enter the financial system and comes with the least friction, Ortega said. Once you trust that user, you work on getting them to trust you through offering a range of possible services.
As the convenience of services like Rappi’s attracts more and more users, their creditworthiness can be better assessed by the data they generate within the app, Ortega said.
“We’re finding that using this consumer behavior, this consumer spending data, we’re able to make a better prediction of whether this person will be a good payer,” he said.
Ortega said that when someone applies for their first credit card, companies have to look at reliable alternative data sources to assess the application. That can be as unique as what type of phone they use. If the borrower falls behind on payments, can their service be halted?
Inclusion will help system
“The reality is 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 a substantial digital migration at the pandemic’s onset before people returned to using cash more frequently. The result is that fewer people will be using cash than before COVID-19.
More people are comfortable conducting digital finance, he added. Since launching its credit card in February, Rappi has seen 1.8 million applications from Mexico alone.
Looking ahead, Rappi will continue to pursue banking licenses in the countries where it operates, with good news for Colombians coming in 2022’s first quarter. Ortega is also watching cryptocurrencies closely.
“I think crypto is changing the way many people do things,” he concluded. “I think crypto is changing remittances, and we are looking at opportunities as to how we can get our users involved in cryptos.”
