Hi guys. Welcome to the Fintech Coffee Break. I’m your host, Isabelle Castro. And today, I’m sharing my coffee break with Santiago Suarez, co-founder, and CEO of Addi, one of the largest BNPL providers in Colombia and Brazil.
BNPL has provided a lifeline to many financially underserved populations in Colombia and Brazil. While the region presents some challenges, the BNPL approach creates an opportunity to approve credit by using sophisticated underwriting and repayment terms, working to the benefit of both consumers and merchants.
Since Addi’s founding in 2018, they have focused on extending customer access to credit and boosting commercial activity through its BNPL app.
I caught Santi after his talk on day two of Fintech Nexus’ LatAm event in Miami in December. We spoke about the challenges of setting up the BNPL in Latin America and its success. Enjoy.
To listen to this podcast episode, there is an audio player directly above, or you can download here. Read a transcription of the interview below.
Isabelle Castro – Hi, nice to meet you.
Santiago Suarez – Good to meet you, too.
Isabelle- Are you having a good time at the conference,
Santiago – Having a great time at the conference. The highlight of the year.
Isabelle – I wanted to chat with you about BNPL and the LatAm market. To start with, what gets you up in the morning and motivates you to do what you do?
Santiago – A few things. Mostly, it’s an adventure. I think building a company, any company in Latin America, is an adventure. And there are no two days alike. And you have the opportunity just to go experience something new every day. Related to that, learning how every day you get an opportunity to learn. And then the third thing; I get very excited about what we’re doing. I get very excited by the fact that for the vast majority of Latin Americans, having access to and being able to participate in the digital economy is not a real option. Yeah. And I think what we’re trying to do is fix that and solve that. And that’s, that’s exciting.
Isabelle – Yeah, it is really exciting. And I’m really excited about what you guys do. When did you realize this was what you wanted to dedicate your life to?
Santiago – So I would say I had always had in the back of my mind the desire and strong viewpoint that I wanted to do fintech in Latin America, purely because of the financial inclusion aspect of it. As I mentioned in my talk, growing up, I think I was on the receiving end of some challenges of not being able to access the financial services system and not having what I would call a fair and thoughtful banking system. So I had always thought about it. And it came through the years. I mean, I think in 2007, I built a model about what it would take to build an E-trade company in Colombia. And it never felt right. And life is funny in that sometimes, when you least expect it, the opportunity shows up.
In 2018, I was leaving Lending Club, and my girlfriend at the time was moving back to Bogota. And I think we tried to do San Francisco without long distance, but it was miserable. And I think two or three months later, said, You know what, I’ll go to Bogota. Maybe this is the right time to do things. And it turned out to be the right time to do things. So we started Addi, and then she had. I got married, and we have a kid now. And so, I think it all worked out quite nicely.
Isabelle – Nice, happy ending. So BNPL, as a whole, has seen a lot of growth, especially in the last year. Why do you think this has happened?
Santiago – My sense is a lot of the growth that people saw in BNPL over the last year was just driven by this mania that was driving BNPL activity in 2021. I think there was a moment where if you said, “I do BNPL,” money would just rain from the sky, crazy revenue multiples. And I think some of that has faded away.
I remain convinced that the opportunity around financial financing and buy now pay later is incredible in Latin America. I think it gives you the ability to offer differentiated underwriting in a way that is very hard to do pretty much anywhere else. But I think you will start seeing much more measured growth than what you’ve seen today.
Isabelle – What have been your biggest challenges?
Santiago – Boy, how much time do you have? What is the biggest challenge? I mean, look, I would say the biggest challenge is lending in Latin America is difficult. So you know you have credit loss spikes or fraud spikes, but I would say the biggest challenge has always been and will continue to remain to number one, learning incredibly fast. And how do we increase our rate of learning? And as the company grows, you got to maintain that rate of learning. It’s harder to do, and it’s easier to learn individually than with two people. The difficulty of learning, I believe, scales exponentially with the size of the company. So that’s the challenge. Have there been other challenges? How do you remain true to your values and culture? Startups in emerging markets are not for everyone. Certainly, fintech startups in emerging markets.
Isabelle – Yeah, I can imagine it’s very, very difficult. What are the effects that you have seen that you’ve had with Addi on your consumers or your customers and especially the unbanked that you’re serving?
Santiago – I mean, look, I’ll tell you something, over 25% of our customers in Brazil have never had a credit card. So I am giving them access to real-time, payment-specific credit that you can use in an E-commerce setting. And that is something that I’ve never had access to before. I believe at some point early in our lifecycle, for over half of our customers in Colombia, it was the first time they could buy online. For some of our merchants, it is the reason they’ve been able to avoid closing the store. So that’s really important. You know that. And then, it goes back to one of the motivations I had about starting a company, which was seeing the great opportunity and financial inclusion that we had, and still have, in Latin America.
Isabelle – One of the controversies that BNPL has had, at least in Europe, I’m not sure whether that’s even translated to Latin America. But it’s, some people believe that it facilitates consumers entering into kind of debt when they maybe shouldn’t. Like it lowers the barriers. How have you seen any kind of instances of this? And how do you manage that kind of risk in your products?
Santiago – Yeah, I mean, we have not seen it, in part because they think that the macroenvironment in Europe and Latin America couldn’t be more different. Like there’s a much more underbanked population. It’s poorly served when it comes to credit access to just giving access to credit people. A lot of these people just deserve the credit, and they’ve never been able to get it.
How do we manage it? And we’re very responsible when it comes to income ratios. Do I think we get it right every time? Probably not. But we always seek to ensure that the product is affordable and sustainable.
Isabelle – Okay, So there have been some instances where people in Lat Am have turned to crypto as a store of wealth because the currency is either fluctuating wildly or the interest rates are going crazy. So how do you underwrite in that kind of situation for your products? How do you manage that kind of risk?
Santiago – I just don’t see it as that big of a risk. I mean, Colombia has devalued 20% in the last three months, and that’s the highest devaluation probably over the last 30 years. So I don’t see it as ever a huge issue. Inflation in both of our countries is under control. In Brazilian Real has actually kind of appreciated over the last four months against the USD. I think it’d be different if I were operating in Venezuela or, you know, some of these countries with triple-digit inflation. You have to be very, very mindful of how you underwrite at that point, but for us, it hasn’t been an issue. I mean, inflation in Colombia and Brazil is roughly comparable to the US.
Isabelle – Do you have any kind of plans to go into other jurisdictions now? You’re just going to stick with these, these two, for a while. Nice. Well, you’re doing really good work there, so I can understand that.
What’s a piece of advice that someone has given to you that you would give to someone else?
Santiago – Go with your gut.
Isabelle – Nice. Okay. That’s a solid one. What are you excited about for the coming year?
Santiago – My son is a small person. Now I say that he has been upgraded from a baby to a small person. It’s like we now have like a small person running around the house. So certainly, my son. Very excited about Brazil. We just moved there. We meaning my family and I moved there in August. We think it’s an incredible market. So I’m very excited about making that happen. And I’m also excited about having another year focused on the operation. We were lucky enough to raise a lot of external capital in 2021. And that basically allowed us to spend all of 2022 buildings, and I’m looking forward to another building year.
Isabelle – I’m looking forward to seeing it. Okay, so we’ve got one last question, which is our curveball question, which is just one at random. I think you saw the ones. So what was the last book you read and would recommend to others?
Santiago – The last book I read, which I would recommend to others, is 4000 weeks. The book basically talks about how 4000 weeks is, roughly speaking, the number of weeks we have in life. If we were to live up to roughly speaking 80 years. Unlike any other time management book that’s all about how you cram everything in and how to be super-efficient, while there’s value there, basically, the view here is don’t. Just let it go. It’s going to be okay. Know that you will never be able to show up to everything you want to show up. Know that you will never be able to do everything you want to do. Choose the truly important things and let everything else go away.
Isabelle – That’s a really nice note to finish on. Thank you so much for your time before we go. How can our listeners get in contact with you or follow you?
Santiago – You can follow Addi on Twitter at @addi_col. The easiest way to contact me is through email at firstname.lastname@example.org.
Isabelle – Okay, perfect. Thank you so so much. Have a great rest of your day.
Santiago – Right on. Thank you.
Isabelle – As always, you can reach out and chat with me on my personal LinkedIn or Twitter @IZYcastrowrites. But to access great daily content, check out Fintech Nexus on LinkedIn, Twitter, Facebook, or Instagram.
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That’s it for me. Until next time, enjoy your downtime.