Great idea, but very difficult implementation. A few random points:
- Latin America countries share the same language, mostly the same problems, but their banking systems operate in completely different ways; the only thing they have in common is that they are all financial oligopolies. You have to manage money through them in their local currencies, that is, somehow you need their blessing to operate.
- The formal sector probably doesn't need these services, they probably have traditional systems in place. However, the informal sector (which is up to 75% of all the Small Businesses in some countries) surely are in need of such services. But then you may be operating in a gray area between legality and illegality since in a way you are facilitating financial operations to non-registered businesses. You may need to consult lawyers in each country, again, each country has different financial rules and laws.-
- Corruption. Many crooks in key political positions don't want the status quo to be altered. Do not underestimate their power.
- Most Small Businesses perform their daily operations with cash, and they feel safer using cash instead of plastic. You need to gain their trust in order to move them toward a digital economy.
Thanks - these are good points you bring up. A few considerations to complement your thoughts:
- Banking systems are indeed different. That's why we've decided to raise the capital ourselves. It allows us to set and follow our own risk assessment and not be subject to onerous regulations. Granted, raising capital is not simple either, but doing so allows us to focus more on providing a smoother, more integrated experience with the platforms in the near term.
- What we've found is that a ton of small business owners operate as the equivalent of a sole proprietorship. What's interesting is that many small businesses actually have a bank account. What they don't have access to are financial resources, such as working capital. These underbanked businesses are the core segment we are targeting right now. As you noted, there are even more informal businesses, but they don't often sell through the platforms we partner with.
- We have lawyers in each country to make sure we've set things up well and comply with local laws. It's a pain, but we view this as an important fixed cost that makes it more difficult for others to replicate down the line.
- Agree on your comments about the status quo and not to underestimate their power. We've met resistance before and foresee this happening again if we scale. Can't really add much else except that we've grown up in countries where this is the norm.
- With our first customers, we've noticed that it's critical to build trust upfront. Some of our best customers to date are small grocery stores and cornershops where 90%+ of transactions are still done in cash. The pandemic has accelerated their adoption of digital payments - in fact, electronic transactions doubled across the region last year. We believe this is a good time to try out a new approach!
- Latin America countries share the same language, mostly the same problems, but their banking systems operate in completely different ways; the only thing they have in common is that they are all financial oligopolies. You have to manage money through them in their local currencies, that is, somehow you need their blessing to operate.
- The formal sector probably doesn't need these services, they probably have traditional systems in place. However, the informal sector (which is up to 75% of all the Small Businesses in some countries) surely are in need of such services. But then you may be operating in a gray area between legality and illegality since in a way you are facilitating financial operations to non-registered businesses. You may need to consult lawyers in each country, again, each country has different financial rules and laws.-
- Corruption. Many crooks in key political positions don't want the status quo to be altered. Do not underestimate their power.
- Most Small Businesses perform their daily operations with cash, and they feel safer using cash instead of plastic. You need to gain their trust in order to move them toward a digital economy.