Em Conversa looks to uncover the secrets in Latin America (LatAm) that have caused the fintech market to boom, from being worth less than $50million in 2016, to $2.1billion in 2022. This week we spoke to Paolo Fidanza, CEO, and co-founder of Keo World, to understand how small and medium businesses (SMBs) can use Buy Now Pay Later (BNPL) in Mexico.
Paolo Fidanza is a seasoned entrepreneur with experience in the technology, internet and mobile sectors. After various successful business endeavours, Fidanza decided to follow his passion and help organisations grow their business more efficiently. He founded Keo World with the intention of boosting businesses’ purchasing power through BNPL and Instant Cash Payout solutions.
Keo World provides an end-to-end digital experience that does not discriminate against lack of credit history or formal income. In early 2021 Keo formed an international alliance with American Express (AMEX), becoming an official issuer of AMEX credit cards and the first non-financial institution issuer in Mexico.
We sat down with Fidanza to discuss the partnership with AMEX and how this would impact the region’s startups looking for investment, and if this sort of partnership was going to be seen worldwide:
Do the variety of currencies in LatAm limit a company’s ability to implement BNPL across the region?
There are some slight differences in BNPL in the B2B and B2C spaces. In the latter, we see the propagation of the same offer across all markets and all currencies. There are differences though, as companies are able to offer different rates; in our case, we have developed our proprietary core technology that is based on the AMEX rates. Using these allows us to control a transaction between a merchant and our client: we control the issuing and we do this across six regions, meaning that we are able manage multiple currencies and projects within our deployment.
How will the Keo World partnership with AMEX impact partnerships for other companies in LatAm?
The AMEX partnership provides us with a variety of developments. The first is it provides us access to the AMEX network, which allowed us to develop our core technology – managing transactions between merchants and businesses. It also allows us to offer our BNPL to any merchant in the world that accepts AMEX as a form of payment. By joining AMEX in this partnership, it means that we have eliminated one of the biggest barriers to the adoption of our solution: integration.
Typically, a provider of a BNPL would have to integrate with a merchant in order to settle the transactions in order for the merchant to propagate the offer to their buyers. By being integrated with the payment provider, any merchant that accepts AMEX as a form of payment does not need integration with us. AMEX allows the client to promote their offer and they will be directed to us, where we do all the onboarding and underwriting.
We really address two really big issues in the industry. The first is access to credit. If I look in LatAm, in some markets, like Mexico, SMBs are producing 52 per cent of the GDP and provide 70 per cent of employment in the country. This sector of the economy only gets 12 per cent of the credit in large parts to the financial system being based on risk and traditional underwriting models. Big corporations will always get the maximum amount of credit – what we do is give smaller businesses a chance to get access to this credit.
Secondly, over 50 per cent of the $280million B2B transactions in Mexico last year were payment transactions meaning there was no digital form of payments. We are introducing them to the digital world of payments and the benefits that it brings, like transparency, anti-money laundering (AML), know your customer (KYC) and being able to formalise the income.
How will startups in LatAm view partnerships between payment providers and non-bank financial institutions (NBFIs) as a new means of support?
I have seen a lot of opportunities in Latin America from the expansion of big payment providers like Visa and Mastercard: they have been very active in partnerships and supporting trade environments for fintechs and blockchain and crypto organisations too. There has been a lot of support in recognising this trend that fintech offerings are for the long term, addressing a number of issues and problems in the space and will therefore be in the thousands of new startups, and will likely lead to big companies in the future.
I think we’re in a very unique position as we are the first NBFI to partner with AMEX. I think we will keep growing because startups need double the support to scale up, not just financially, but also in terms of experience and networking too. The financial sector, by nature, is very challenging and highly regulated. I’m all in favour of regulations as they protect consumers and that’s very important. Innovation must be viewed in a similar vein to security – one cannot work without the other or it will fail, as innovation is useless without the guaranteed safety of consumers’ assets. Fintechs need support from the traditional guys and the big guys, and I believe these incumbents need the fintechs’ innovative tech.
I believe the future will be full of these collaborations that will impact the market through investments, acquisitions and mergers.