S02E24 English - Brazil: a digital payments forerunner, with Vinicius Amorim

Speaker A: I think that the heads are changing and like, moving a little bit fast. We had to find a, uh, solution to make the digital transactions or contactless transactions.

Speaker B: Hello and welcome to VMIX Remix by Veritran. This is your podcast to understand how digital technologies are disrupting traditional finance as we know it. I'm your host, Katie Yanos Small, the CEO and founder of Upana. And in each episode, I speak to leaders at the front lines of digital transformation to help you understand what's coming up. Today, I'm honored to be joined by Vinicius Amorin Vinicius is the chief executive of Tapago, a Brazilian pay tech company that he founded nearly 10 years ago. Vinicius tells me, in fact that just yesterday they celebrated nine years since their very first transaction. Vinicios. Hello. Welcome. Thank you for joining us. It's such a pleasure to have you here.

Speaker A: Hello, Jetseb. Thank you.

Speaker B: So before we get into the Brazilian payment system, Vinicius, I'd like to, um, just get a brief overview from you about what Tpago does specifically. Can you give us a quick overview?

Speaker A: Sure. Ah, so as you said, we founded Tapago almost 10 years ago and for yesterday we celebrated nine years of our first transaction. And we developed a payment solution for, uh, jurisdiction food and meal vouchers. So we are the first company in Brazil that we don't use flashcards for food vouchers that the companies gives for their employees. Uh, so we developed a payment solution that end users use their own cell phone to pay to make the payments in the merchants. Uh, so we have to make the agreements with the merchants so they accept our solution and our users go to the merchants and make the payments with our solution. And we manage all these benefits in the payments and the transactions. So this market here in Brazil is regulated for the government. So we have to adjust all of the solution, uh, to following the regulation here also.

Speaker B: Absolutely. So it's a closed loop payment system, effectively that's based on apps instead of payment cards.

Speaker A: Yes, yes. We don't use ah, cards. So it's just that to make the payment in our system.

Speaker B: And can you give me an idea of the scale? Um, Brazil is a huge country. Obviously this is quite a focused solution, focused on, um, you know, one part of the market, but then you've had to have these agreements with all these merchants. So tell me a little around, around that.

Speaker A: Yes, Brazil is a country. So we, we make a strategy to focus in, um, a countryside of the state of Sao Paulo. We are from Maria. It's a city like 400 km far from Sao Paulo. And we focus in this area to increase our solution because this market here in Brazil, it's huge. Also the people spend like uh, 140 billion a year in this solution in the whole Brazil. So uh, instead of Sao Paulo it's uh, with big market and we focus it in the countryside like the area of Maria City. So we focus it here. Uh, and nowadays our users spend around 1 million guys a month in our solution. And we have around 1,000 uh, merchants data set Tpago as a payment solution also.

Speaker B: Amazing. Cool. So I imagine that when you started Tapago 10 years ago, um, app based payments were quite out of the box.

Speaker A: Yes.

Speaker B: Since then PECS has arrived in Brazil and really revolutionized the way Brazilians pay for things. Tell me a little about what your crystal ball tells you for the future. How do you expect payment habits to be changing in Brazil in the year ahead? In 2023?

Speaker A: Yes. When we started uh, the payment solution, mobile payment solution was really uh, out of the box because 50% of the cell phones here in Brazil uh, were smartphones and 50 was rework uh phones. So it was really out of the box. And now that we have peaks and um, because of the last year that we have all the online transactions increase really fast here in Brazil. So it's nowadays more you could say that's normal. Uh, but in the past was really a m. Little crazy. The only way to make the payment was the cell phone. But nowadays it's okay. And we could say that Pix help a lot us to uh, make the solution uh, easier to. So it's good for us when the users are uh, already using Pix and they are starting to use Tapago.

Speaker B: They already have that custom, that habit of using the app based payments.

Speaker A: Yeah, the custom to use that to open some phone to make payment. It has been increasing uh, really fast, uh, especially because of the peaks that this year, this month we celebrate two years of peaks here in Brazil. And it was a solution that the Central bank of Brazil and made as an obligation for the big banks because all the banks were obligated to, to give the solution for free for the population. So it was uh, a very nice strategy for the Central bank of Brazil to make the digital payments as a uh, real solution. The Central bank of Brazil have been working a lot of the uh, digital payments and payment solutions since 2013. They created uh, regulation about the electronic payment solutions. In 2013 they have been increasing the regulation and there's few obligations of the few banks to Give this solution. Now we are discussing uh, and fewer solutions are introduced. Starting the heart about the open the entity and we already are discussing about the digital realm, the crypto realm for the next years. So all the works of the central bank are looking for the future.

Speaker B: Do you think those changes are going to have big impact on the way Brazilians pay, do you think? I uh, think, I mean perhaps it's that peaks already was the big change. But do you expect different habits of payments in the years ahead?

Speaker A: I think that the hacks uh, are changing and like moving a little bit fast because of the, especially because of the pandemic in the last years. We had to find a solution to make the digital transactions or contactless transactions. All those solutions are helping to make the hats different. We always say here in Tapago that if we arrive at the office to work and we forget our wallet, it's not a problem. You just work normally and if you need, you borrow money from a friend and you have lunch and do everything. But if you arrive at your office and you forget your cell phone, you will be late, you want to go back home. So we are doing this and other companies are doing the same. Like to put the money inside her phone.

Speaker B: Yeah, yeah. Um, it's an interesting point that you make right that we can't live with our cell phones anymore. You could leave your wallet at home and life would go on. Um, so what about in terms of the um, business side of things if the payment habits are changing towards cell phone based payments. You work very much on a closed loop system. Tell me about the dynamics that you see in terms of maybe interoperability or the way that other players are operating in those types of closed loop systems.

Speaker A: Yes, the closed loop systems are difficult because we have to make a huge amount of agreement with a good amount of merchants to then set your system. So we always try to solve the chicken egg problem. Like I don't have merchants because I don't have users and I don't have users because I don't have merchants. We trying to find good solutions but we always uh, think also about the sustainability of the company because we have many companies here that are using like the open system.

Speaker B: So Vinicius, when we look at Latin America, Brazil is really a reference um, when in the payments, in the payments space. Right. The, the, the growth of, of uh, app based payments and cell phone based payments has been really impressive. What do you think the rest of the region could learn specifically from Brazil when it comes to mobile payments? What's something they you know what's, what's something that you have been through that you kind of understand about the market that others could, could learn from.

Speaker A: Yeah, it's, it's a good point because Brazil is really huge. But a good point that I think that it's necessary for the other countries that ah, here, Brazil, you could say that pics. It's the biggest mobile solution. Uh and this, this kind of solution, it was created by the central bank of Brazil. All the, the traditional banks and the big banks, they, they had no option. It was an obligation and it was for free for the users. It is for free and will be forever. So it helped a lot to make this work and fast and they are still looking for new solutions and innovation. So um, I think that's some point that the other countries could uh, talk about and understand how the Brazilian market is working and maybe to lose this kind of solution in other countries also. And a good point would be like how all these countries of Latin America could connect this kind of solutions to make it easy to ah, make this kind of connections.

Speaker B: That would be amazing. It feels like ah, a far off future though, it hasn't it?

Speaker A: Yes.

Speaker B: Um, Vinicius, it's time for us to go to the lightning round of questions. This is uh, five questions, quick questions, quick answers. Are you ready?

Speaker A: Yes. Let's talk.

Speaker B: Perfect. Which book are you reading right now?

Speaker A: Uh, I'm reading right now the book that's called how to integrate staff Safe and Warp from Timothy Keller. Really good for entrepreneurs.

Speaker B: Amazing. What's the best piece of professional advice that you've received?

Speaker A: The best one is to become of the things that are going to happen. The things doesn't happen from one day to another one. The things are going to be uh, day by day. So we have to keep you safe and be calm that these things are happening.

Speaker B: Kind of not um, worrying about the day to day dilemmas so much and thinking about the longer term strategy. Vinicius M. What is the app that you use most?

Speaker A: Um, I'm not so proud of that but I use a lot Instagram. I'm quite to reduce how many times uh, I spend.

Speaker B: Perfect. All right. Vinicius, when will we stop using cash?

Speaker A: I think that we are close to that. Especially here in Brazil. I don't use cash anymore. It's really difficult. But like in my city when I'm here I just use Tago and when I move other cities I use just like the southern bay. Difficult to find cash in my wallet but I think that maybe more three years especially because the central bank are, uh, finishing the structure of the digital health.

Speaker B: Wow. Finally, Vinicius. Who else would you recommend that we invite onto the show?

Speaker A: Um, I would recommend to friends of mine. They are founders of other film types. One of them is Bernardo Pascobici. He is the founder of yog. Uh, and the other is Marco Stunio. He is the founder of istaevstool.

Speaker B: Perfect. Well, thank you very much for the recommendations and thank you very much for taking part in this conversation. It was really, uh, fascinating conversation. I feel like we could have been talking for a lot longer about these topics, but, um, we keep it short and sweet here on vnextremix. So thank you so much for taking the time. Vinicius, it's been a pleasure.

Speaker A: Thank you. It was a really nice conversation.

Speaker B: And thank you for tuning in for this new series of Veens Next Remix. Be sure to follow us on Spotify and Apple podcasts and turn on notifications to be the first to hear the next episode. We'll be back soon with more VNext Remix insights.