Carlos Del Valle, Co-Founder and CEO of Tonder.io - Building Fintech Infrastructure for Latin America

Speaker A: This is the scalepoint podcast, hosted by me, Martin Kodorish. On this show I sit down with founders and experts in the payments and fintech industry to explore key trends, opportunities and the realities of building a sustainable and profitable business in this next phase of the industry's growth, defined by tighter budgets and more challenging access to external funding. Right, let's get started with this week's episode. So welcome back to another episode of the scalepoint podcast where we dive into the ideas and uh, infrastructure and people shaping the future of fintech. Today I'm joined by Carlos Del Valle, co founder and CEO of Mexico based Tonda. Carlos, it's great to have you on the show. Welcome. How are you doing today?

Speaker B: Great, thank you for having me.

Speaker A: Now, on your LinkedIn, you describe Tonda as an all in one infrastructure to accept digital payments across latam. It's kind of quite a bold mission in the region with huge payment complexity, I think. So maybe to kick things off, uh, maybe just tell us a bit more about yourself, about Tonder, and sort of what brought you to this space and then we'll explore the wider region in more detail after that.

Speaker B: So Tonder is the evolution of what? One of the main challenges that my co founder and I had on our previous company previously, we founded a financial, uh, services firm in Mexico and we got to a point where we were required to capture card payments from our customers that were already in default through the originated loans that we had with them. And since there was no any type of bank pool system, uh, back in the day, we were forced to use a payment processor to capture those payments. And the first challenge that we saw was that we were having 60% approval rates and that translated basically to a loss on our P and L. So we were forced to dig deeper into what's actually going behind the scenes through credit, uh, card rails to be able to solve that issue for our company. Eventually when we sold that company, we uh, discovered that there was multiple companies having the same challenge and that's when we decided to go and tackle it since we already had a deep, uh, understanding of what we could do to solve it. And that's how Thunder was born and built.

Speaker A: Okay, cool. So, so the, the real pain point there is the approval rate, right? So 60% is particularly low, would you say, in, in, even in the context of, in any context. But so just to kind of um, uh, expand on that point, it is

Speaker B: usually low, but in Latin America, especially in Mexico, it's the average that most digital payments come across. That's due to Several reasons, uh, one of them being that payment processors are not connected to multiple local banks or the main uh, issuing banks of the cardholders. And that's where uh, the majority of rejections happens. And obviously it's uh, important to mention that uh, in Latin America, uh, regionally we have one of the biggest uh, fraud rates uh, compared to other economies in other parts of the world.

Speaker A: Well maybe we'll come back to that in a minute but I just want to rewind a tiny bit because you mentioned you already you started a previous company which you exited and sold. And for those who can't actually see you, obviously just listening to the podcast, you're quite a young guy. So um, tell me a bit more about that initial business and um, when and what your life stage was when you, when you started that.

Speaker B: So it was when we started in high school.

Speaker A: I was a high school business.

Speaker B: Right, school, correct. We were in high school, my co founder Eugenio and I, we were 16 years old and we were conducting different uh, interviews in multiple uh, mid sized companies, uh, in our city in Monterrey, Mexico. Ah, that was a school project. But eventually it led to us identifying a big issue uh, on the, on these mid sized companies and was that their employees were living paycheck to paycheck and that was due because they didn't have uh, financial education to be able to have uh, good financial habits and managements and banks really closed the door to give them the access to different kind of financial products. And uh, that's how. So our first company was born and what uh, we built with so was a uh, loan system where we were able to get into an agreement with this midsize companies that we were going to give loans to their employees and the amortization was going to be deducted directly from paycheck which that obviously was a uh, guarantee for us which allow us to be able to provide them with really low interest rates compared to what the banks were offering them in case they were offering them loans to them.

Speaker A: Right. And then the experience with regards to the credit card uh, acceptance rate was when they're making repayments or was it or.

Speaker B: So when the pandemic hit there was a lot of layoffs in all of these companies and we couldn't get our payments through their paycheck legally. They needed to first use their paycheck for other uh, laboral uh, requirements in the country. And then it came uh, to us. So most of these customers went into default and we were forced to find different types of ways to collect payments from them. Because they were no longer part of the company. And that's when we started using credit, uh, card payment processor.

Speaker A: Gotcha. Interesting, interesting. Wow. And so, you know, you mentioned you successfully sold that business started Tonda. Um, so what? And obviously Tonda, you know, the inception was as you described. But what is this? Maybe you can just kind of explain how the business has developed since it was started. And when was it started? How many years ago did you start, Dunder?

Speaker B: 2022.

Speaker A: So 22. Since 2022. You know, talk me through the evolution of business and where we stand currently.

Speaker B: The first years were most of uh, building phase, as you know, the payments industry. Building a new product in the payments industry takes a couple, uh, a couple of years in time. Right. Because there's a lot of complexity that, that goes into it. From making local connections to outdated banking systems to regulation, uh, internal conciliation and setting up the right processes in order to be able to go live with the first customer. So the first two years was the building phase. Uh, the next two years, which we're reaching now, uh, was us, ah, launching and specializing in the gaming industry, which is one of the industries that that is growing, uh, the fastest in Latin America. Double digit growth on a year by year basis. And there hasn't really been any payment provider that goes, uh, deeper into solving their requirements and the complexity that it takes in the igaming industry.

Speaker A: So who is a typical customer of yours? Um, maybe just describe what kind of business is using Tonder as a platform.

Speaker B: Sure. So our typical customer is an online regulated casino. And besides that we have indirect, uh, channels of distribution through different iGaming platforms. So the equivalent of what Shopify is for e commerce merchants. We're going and building these partnerships with igaming platforms for igaming operators which allow us to be able to grow even faster.

Speaker A: And just in practical terms, what services do are you providing them? It's pay in and payouts. Maybe just talk me through.

Speaker B: So Thunder provides a complete payment infrastructure through one API, from capturing deposits to credit and debit card, to providing local payment methods in each of the markets to also handling withdrawals and payouts.

Speaker A: Yeah. So it's like a stripe, uh, possibly it's like a version of stripe for latan. Would that be a fair way of describing it?

Speaker B: Correct, yes. We're basically building stripe for the iGaming industry.

Speaker A: Maybe just let's touch on Latin America and the complexities of the region and what your footprint is currently across the region. Yeah.

Speaker B: So Latin America is a really fragmented region. Uh, especially in payments, we have over 39 currencies in 33 countries. And each of the different market has different kinds of payment systems, different types of regulations. So to actually build a payment infrastructure that is capable of serving the payment requirements that these merchants have, uh, regionally takes a lot of time. So uh, our first approach and overall, uh, growth has been going market to market. Right now Thunder is uh, online in three markets. Mexico, Chile and Colombia. But we have actually taken the time on going into each of the different markets, getting to know the market regulation, adapting our systems and processes, and building the unique local connections to each of the different, uh, banks and payment networks that are required to serve in the best way each of these markets.

Speaker A: Um, and what is your company set up? Your. You're located locally in these markets or centralized, let's say in Monterey or how many employees do you have? Yes.

Speaker B: So, uh, our company, uh, and our team is all over Latin America. We have team in Ecuador, Colombia, Brazil, Chile and Mexico. The majority of them being in Mexico, which is our biggest market right now.

Speaker A: There's kind of a remote team, what would you say? It's quite remote. Workforce.

Speaker B: Correct. Right now we're working remote.

Speaker A: Uh, and how do you find that? As the founder, presumably you're the CEO or you, you meant, I think you're a co founder who is on your sort of management, um, team. Who's, who's. Who you're working with on the management team. Use it.

Speaker B: Yes. So my first company solo, we were used to going into an office, so which I got adapted to it and I like it even better because of the different uh, approaches that you have with your team versus being online. But however, we have been able to adapt different types of tools to bring the uh, offline office experience into the digital world. And we, every quarter we're doing meetups, uh, with our team and we're basically visiting them, uh, around uh, uh, Latin America as well.

Speaker A: Well, so you, rather than having office, um, presence and being 100% remote, you have this sort of quarterly meetups, is that what you're saying, where you, where you get together as a team in a location that same location or different location each time?

Speaker B: Yes, it's generally by uh, close to the end of the year and mid year that uh, we get together just to review our results or objectives and to be able to do team, uh, and culture building.

Speaker A: Right. Okay. Um, and tell uh, me about the iGaming industry a bit more in general. I mean, obviously it's a huge industry. Um, and are these online Casinos, they servicing customers, um, in Latin America in those domestic markets or they do, they have global customer bases and how do they operate?

Speaker B: So uh, there's two kinds of gambling, uh, operators in Latin America. There's local operators that have local licenses and then there's international operators that are starting to get into local uh, markets. In Latin America, obviously, uh, each country has its own regulation for uh, gambling. Uh, we only do regulated gambling. And they uh, the thing is that right now there's, there hasn't been any real solution for them, uh, regarding payments, because we have seen amazing great payments companies in America, but they're really horizontal. Right. But yeah, so now we're in an economy that requires special attention or special matters.

Speaker A: So personalization, right?

Speaker B: Yeah, exactly.

Speaker A: And what do you think is driving that need? Um, what I mean, so you're focusing on that vertical and you specialize in it. Can you give me an idea of what you're doing differently from let's say a horizontal player.

Speaker B: Yes. Being a vertical player, uh, and specializing night gaming is getting to actually know uh, what's the unique problems that they're having. And when the head of payments of a night gaming operator has a conversation with someone on our team, they really know that we know about their operations. How an AI gaming operator works versus a horizontal payment platform that is serving different kinds of industries. Right. It's way too complicated to actually get to know uh, each industry in its detail way and what's the unique problems that they're having.

Speaker A: No, I agree totally. Sort of um, understanding your customer's business, like almost like a consultative way. I think that's uh, that brings a lot of comfort to your customer that you understand their problems and can solve them. Right. So totally agree. Um, hey look, why don't we jump. There's obviously this real topic that I wanted to talk about around cross border payments and stablecoins in the context of Last American, how you're using, but I know you are using them, so we'll come on to that. Um, I find that particularly interesting, but in terms of, let's just go into the product and technology a tiny bit. Um, of Tonda, um, you know, you describe it I think as a composable platform. Can you kind of unpack what that means? Um, in real terms?

Speaker B: Sure. So composable means that each of our customers can pick and choose both the payment requirements that they want. That means that they don't have to buy our entire platform. They can start first with credit and debit card deposits, eventually launch a couple of local Payment methods and then withdrawals. The majority of our customers uh, start with deposits with local uh, card deposits and then eventually move on and get all of our products as well.

Speaker A: So it's quite an unbundled solution, right? Correct. Which I think is interesting, isn't it? Because some of the other larger players have started to unbundle and offer the level of flexibility that you've, you've just described presumably, possibly. Was it like a strategy of yours from the very beginning or something that you found yourself pivoting into in response to customer uh, requirements.

Speaker B: So we came across rich, uh, this through customer responses because we identified that in the I gaming industry the majority of operators don't want to just rely on one payment infrastructure since it's high volume and it's 24 7. So they started using one of our products and when they gained confidence and saw good authorization rates, they wanted to use another of our product. And naturally across six to nine months when launching an operator, they're already using the majority of our product.

Speaker A: I understand that you provide a level of orchestration. You have multiple acquirers that you can route transactions to.

Speaker B: Yeah. So in each of the local markets where we currently operate, uh, as I said, we go and actually make our homework and do their direct local connection to yeah, acquiring banks that allow us on um, the underlying infrastructure and our backend to be able to route between these banks depending on what we're seeing with these types of transactions. So in some cases we're connected directly to the issuing bank of the cardholder which allow us to be able to directly send the transaction there and obviously guarantee better results.

Speaker A: Got you. Yeah, so that's made the difference. Okay. Um, and um, I mean is it all sort of proprietary technology that you've built in house or have you leveraged third party infrastructure yourself or what's your view on doing that?

Speaker B: So core product should definitely be a uh, built in house and our core product is built in house. However, we've been using multiple third uh, party technologies that have been for quite a, quite a while that already went through the hustle of building uh, to be able to improve most using them as a value add to our core products. So I'll give you an example. So local payment methods, right. There's wallets, there are bank transfers. We're not going and building uh, our own local payment methods but we're doing the local connections. Right. Or then there's BC and MasterCard that have been building different kinds of components to improve the payment experience for the user and we're connected directly to them as well to be able to provide them to our customers.

Speaker A: But what about like onboarding, that kind of module? Is that entirely built by yourself or do you leverage external providers from onboarding?

Speaker B: We're using different types of tools as well that uh, have been doing great job doing uh basically KYCS procedures and our black list etc.

Speaker A: So yeah let's dive into this topic around uh. I think in our pre prep call you know I was curious about whether or not using stable coins, you know because it is the high topic at the moment. Um has been and you you know you were, you were quite interesting that you've been using them for quite a while. Um, I understand and obviously stablecoins I know from my own standing are extremely ah popular um in Latam in general. Um maybe you can just explain why that is um and how you support stable coins or use them in your business.

Speaker B: Yes. So stable coins are gaining a lot of popularity in Latin America especially because they're pegged to uh, to the US dollar that the grand majority and the most popular stable coins which is really important because if you see inflation across different local uh, uh markets in Latin America it's uh, it's really unstable for a lot of different people. And we've been starting to use stable coins to do cross cross uh border settlement simplicity. So uh as I mentioned we have a lot of international customers that requiring uh cross border settlements and we, we were going to the old traditional way of doing those cross border settlements which obviously uh is really tedious and it's really costly versus Stablecoins. So that's when we started using uh stablecoins for this specific financial operation and it's been uh really really marked the difference for us internally uh and for our customers as well.

Speaker A: So this is set for merchant settlement. Right. So when your merchant is uh located in another jurisdiction within the Latam region is it you're using stablecoin to facilitate that settlement to them in Latin America

Speaker B: or outside of Latin America as well?

Speaker A: Outside? Outside, yeah, I mean it's one of the, the sort of three big use cases right for stable coins. The other one is internal liquidity management and then, and then cross um border payments um themselves. But uh merchant settlement is definitely a really interesting one. Um so I mean when you say outside of Latin America some of your customers are based outside of Latam and your you're using stablecoins to settle with them let's say in Europe or in other markets or. Can you just explain a bit further?

Speaker B: Yes. So These international merchants that we have, uh, a lot of their uh, headquarters and their corporations are set up in Europe and Asia, ah, Africa et cetera and they require for us to settle uh, directly uh, to them over there. So it's kind of a hassle going through the traditional payment rails to do cross border settlements. So stablecoins has become really handy for us there. And as emerging as Mexico is right now with near shoring, uh obviously there's, there's a lot of uh, growth in the industry in Mexico and stablecoins is going to be one of the primarily use um, uses of, of currency and transaction for all of these uh, transactions that are going on.

Speaker A: So what near shoring you mean? Um, some level of outsourcing to, to Mexico from let's say the US for the leverage technology capabilities.

Speaker B: So I'm, I'm referring to traditional industries. So there's a lot of manufacturing plants that instead of setting up shop in, in China starting to come and invest into Mexico. There's been a lot of investment uh, in, in Mexico and there. All of those manufacturing uh, plants are doing business directly with the US Canada etc and obviously stablecoins are going to be uh, playing a huge role in, in, in this operations.

Speaker A: And you're seeing that volume already in your business. I mean can you give me a sense of how much you are putting

Speaker B: 3 on stable coins right now? About 40% of uh, our volume of settlements is being done through stablecoins.

Speaker A: Would that be like usdc, um, or Tether or Circle? Which whole mixed bag or.

Speaker B: Yes, it's a mix between those, those two.

Speaker A: Right. Um, I mean I suppose one of the big markets where stablecoins and the whole inflation topic that you mentioned, I mean, I suppose Venezuela, I mean yeah, inflation is a big issue across the region. But the other one is Argentina. Right. Um, I think there's a significant amount of usage there. I mean what insights can you provide specifically on Argentina?

Speaker B: People want to have a secure ah, currency for their savings that they know that there's not going to be a lot of fluctuation between what's actually worth. But generally speaking it's really complicated for someone in Argentina or in Mexico to get a US based dollar account. So stablecoins come in handy to be able to solve this issue. You don't have to longer go to the US and have an open uh, checking account in dollars which it's really complex to do if you're not a US citizen now you can just basically go into an exchange and buy stablecoin. And now Your savings are backed up one on one by, by the U.S. dollar. Right. And we just saw the U.S. uh, the, this past month pass the, the Genius act, which is obviously great progress in stablecoin regulation and basically setting up the rules for stablecoin insurance. Right. That ah, there needs to be a backup one to one with the US dollar. There's going to be obviously quarterly audits, et cetera. So that looks really promising uh, also for Latin America as well because US as an emerging economy we're always looking to what's the US doing and how can we incorporate their innovation into the challenges that we're facing, uh, regionally and locally in each of the countries. Right. So I think that was uh, a pretty good step that the US took and we're going to be looking from landmark,

Speaker A: I think in early this year, in April, I think in Argentina, the exchange controls were relaxed. The foreign exchange controls that were in place that limited how much local currency could convert, hold into foreign currency or dollars were relaxed. I mean, I don't know if you're aware of that or if you have a view on that to what extent that's actually impacted the demand for stable coins. You might expect it then to soften the demand for stable coins if you can hold or convert fiat currency into USD, um, whereas previously you weren't able to do that up to a limit of 200amonth I believe it was. So now you are, uh. Do you think that, what kind of impact do you think that might have?

Speaker B: Look, we're seeing other local markets, uh, for example in Mexico, one of the biggest crypto exchanges, Bito, just launched uh, their stablecoin pack to the Mexican peso. So I, that's one of the tools that they're going to be doing in order to mitigate that risk that obviously every person goes and uh, exchanges their local currency for stablecoins. So we just saw that in Mexico happen. Maybe. I think it's going to start to happen in other uh, economies of Latin America.

Speaker A: And back to the way I had a question how you guys are using stablecoin, Is it something that your customers are fully aware of or is it abstracted away from them, almost invisible that they, that you're settling in stablecoins. How's it handled, uh, from a customer point of view?

Speaker B: So we started using it because they asked us to.

Speaker A: They asked it, right?

Speaker B: Yeah, exactly. So go. They wanted us to go from just seeing traditional banking rails to stable coins. So we basically were forced by our customers to do it.

Speaker A: So they provide you with A wallet and you just transfer into their wallet and simple as that. So there's no level of abstraction. They're fully aware in fact they've requested it so uh, that it's come. It's like a uh, response to customer demand.

Speaker B: Exactly. And the next step is to embed that into our platform so that they can do it themselves without us having to go through the whole financial operation.

Speaker A: So currently it's more of a manual step. Is it more of a. Yeah, it's

Speaker B: a, it's a manual procedure that our FinOps team does.

Speaker A: Whereas you want to embed it. So it's effectively part of the portal. Customer. Portal side.

Speaker B: Exactly.

Speaker A: Hey, so why don't we start wrapping up um, a tiny bit. I'd love to hear about your vision for the future for the business. Right. So you know, uh, first of all actually for the business and then, and then also for the region. How do you think um, the region's likely to evolve and how will you as a business respond um to the region and the I Gaming industry?

Speaker B: Number one is real time everything. Instant payments will become table stakes. Uh, we've seen what peaks in Brazil has done and now any, every country needs to take this an example. Some countries are already taking the initial steps of building their own uh, version of pix to be able to get uh, strong customer adoption and obviously harmonize uh, the, the payments uh industries uh locally. So that's one of the things uh, second is more coherence regulation across all the markets in Latin America because regulation in each market is really different. So that's why it's complicated to build something uh, for Latin America. Uh from day one you need to go locally to each of the countries, understand what's going on, adapt your systems to them and then you can launch in each of those markets. So I think that's something that we're going to be seeing in the next couple of years. Uh, besides that I'm really excited. I'm really bullish in Latin America because us as ah, uh developing economies with strong digital uh potential we're forced to innovation and we've seen amazing fintech companies for the last five years doing amazing work from neo banks, uh, handling financial inclusion and tackling those, those issues, uh to new payment infrastructure companies handling B2B payments uh, and other types of uh, companies. So I'm really bullish on, on what's going to happen in Latin America in the next couple of years.

Speaker A: What about Tonda? Where do you see Tondo in the next five years? What's the plan. Yes.

Speaker B: So we see ourselves as being that critical underlying infrastructure uh, for payments across Latin America. That is going to take a while but we have already proven ourselves in three markets. Uh so every time there's a new innovation we want to be the first in market to have it in place and our customers and merchants to be the first to have them in place.

Speaker A: Place.

Speaker B: So ah, that's our vision. As I said it's going to take a while but uh, we're, we're going in the, in the right path.

Speaker A: Cool. Hey uh, Colin, so we've got a couple of sort of quick fire questions. Right. So you know, if you could fix one thing about LATAM Payments, um, ecosystem overnight, what would it be?

Speaker B: Going from cash to digital.

Speaker A: Of course. Course. That's a big one. We keep forgetting, don't we? There's still so much cash around. Tell me.

Speaker B: Yes, yes. And it's because we are, we have had a lot of mistrust in banks and currencies. So it's most more of an emotional trigger than a logical trigger of why the majority of us or people having gone from cash to gdo.

Speaker A: Yeah. Um, and do you think that digitalization of cash or that transition from cash is it gaining momentum? Where do we sit right now?

Speaker B: It is, it is. There's growth every year regarding of uh, people opening bank accounts and using cards and other digital native local methods which is good. However I think there's still a lot of space for education that needs to get done to be able to take the majority of people and going into ah, digital.

Speaker A: Just one, one last question which I'll probably slot in earlier actually about Pix and the comment you made around real time payments and everybody seeing the success of PIGS and looking to copy it. What is the implication you say for um, international card schemes um in the region?

Speaker B: Brazil is a clear example, um, because now more than 70% of online transactions are going through pigs in Brazil.

Speaker A: Yeah.

Speaker B: So basically cards are the equivalent of

Speaker A: non existent and how does that compare to other markets? And you're suggesting that's going to happen in other markets. But what is the, what's the proportion currently in Mexico for example?

Speaker B: What we see now Thunder, is that 60% of transactions are going through cards and 15% through bank transfers and the remaining through cash vouchers. However Mexico is a good example because in the last four years they launched the equivalent of pix, which was called codi. Uh the Central bank of Mexico launched it a couple of years ago. However it was a failed project. That's the reality like there was no adoption. So I think there needs to.

Speaker A: Why was that? Presumably they kind of learned the lessons of pics and tried to implement them. What do they do differently or fail to do?

Speaker B: I think obviously there was not adoption because the central government didn't push it. Uh, it's supposed to be pushed. And I think also if they were able to make stronger relationships with banks to push it, maybe it would have been way better. Now we're seeing Chile, uh, Pix is going to be launching in Chile. They have also a local payment method that's starting to get a lot of traction. So we're starting to see some momentum around countries that are looking at Brazil's example of Pix.

Speaker A: Well, I think we'll wrap it up there. Thank you so much for your time. And you know, what's the best way for the audience to contact you?

Speaker B: I appreciate it, Martin. Through LinkedIn.

Speaker A: Yeah, we'll just. Okay. Carlos Devali on LinkedIn. And, uh, yeah, definitely looking forward to, uh, our next chat. Love to, um, hear about the next developments of Tomlin in the future.

Speaker B: Likewise, M. Martin, I really appreciate the conversation.

Speaker A: Thanks for tuning in to this episode of the Scalepoint podcast. Don't, uh, forget to subscribe, leave a review and follow us on on social media. You can also find out more at our website, which is scalepointpartners.com that's it for today. See you next time and take care.