The rapid growth of Brazil’s economy and the inclusion of thousands upon thousands of Brazilians into the market is, in general, great news. But when you’re dealing with consumer knowledge and the responsibility such socioeconomic shifts imply, the existence of a learning curve is inevitable.
Many Brazilians now find themselves with a purchasing power they’ve never experienced before. What’s more, they are also able to access tremendous amounts of credit, including those without fixed incomes or who are underbanked. Retailers sell products and services with payment plans that leave consumers indebted for months and even years.
The scenario has changed so drastically that the debt rate of Brazilian families has doubled in the last decade alone, with over half of Brazilian families being in debt or bankrupt and 25% of Brazilians dedicating more than a third of their incomes to debt payment. In the credit industry, delinquency rates are up 20% among first-time borrowers.
This situation has created a gap – a gap startup Pagapramim is looking to bridge.
Pagapramim, Brazil’s First Bill Extension Platform
Pagapramim is the first bill extension platform operating in Brazil. The company was founded last year, its co-founders Victor Silveira, Rafael Zatti and Alexandre Ferrari spending months making the technical and legal preparations necessary to operate in the market. The Pagapramim platform will officially launch this year.
Pagapramim has been created in the mold of companies already up and running abroad, such as BillFloat and BillMeLater in the United States. Users simply register their bills for payment on the site, choose the time period needed for repayment (up to 28 days), and receive an invoice, including service fees, on the selected date.
An International Model Adapted to a Latin American Reality
Though Pagapramim may be referred to as a clone, the company has put an enormous effort into adapting the model for the Latin American market.
Its aforementioned U.S.-based counterparts offer a mixed bag of services, including long-term loans, and often charge high service fees. Pagapramim, on the other hand, operates according to the local market. Its initial focus is on utility bills as well as partnerships with billers and e-commerce platforms to become a new, cashflow-accelerating payment option for both types of entities.
Victor Silveira, COO of Pagapramim, told us more about the company.
Emily Stewart: Brazil’s finance infrastructure is notoriously difficult to maneuver. How have you managed to do so?
Victor Silveira: We believe the finance system in Brazil is also a cause for the high number of people in debt. Easy access to credit and a general lack of debt experience create a snowball effect for many families. Pagapramim came to be a new option to control your finances, pay your bills on time, be able to buy a certain product you want and don’t have the money to pay for on a specific date.
For our business, it was essential to have funds to cover the initial operation. So, we partnered with an FIDC (investment fund with interest rights) that allowed us to start the operation. It was also necessary to get a financial license to operate. Most importantly, we partnered with one of the largest credit and retail bureaus in Brazil to serve individuals blacklisted on the market due to overdue payments or other reasons.
ES: Your business model seems a bit risky – paying bills for your customers and requesting payment from them later. What mechanisms do you have in place to ensure you receive payment?
VS: When you use Pagapramim, you have to register your bills on the site, and we pay them for you. You can choose to pay us back from anywhere between seven to 28 days later, according to a transparent service fee. Fees are simple and lower than the high fees charged by banks, credit cards and financial agencies.
As mentioned, we have a partnership with one of the biggest credit and retail bureaus in Brazil, and they provide us their blacklist (people with bad credit histories). By analyzing that, we are able to filter the users we intend to have on our platform. Not only that, but we also limit credit for new users, and in correspondence with their behavior on our platform, they receive more credit according to their scores. We rank users and offer more credit as a reward on-time payments, verifications, etc.
We are currently negotiating with a collection agency to become partners and thus guarantee that if a user does not pay us and we consider him or her a “terminal customer,” we will sell this debt to the company for its handling.
ES: You presented at the AVCC last month in Miami. What was your experience like there?
VS: The AVCC was such a great experience for us. We had the pleasure to be there and meet so many interesting people. We got to know other startups and hear about other ideas. Beyond that, we had the opportunity to present our business to the main investors in Miami.
During the event, we organized many meetings, interviews and great opportunities for funding. We can say that the legacy of this conference will be in our company’s DNA forever, and we intend to participate in other conferences with a focus similar to that of the AVCC.
Right now, Pagapramim is working towards its launch and seeking new partnerships with more billers and e-commerce platforms. The team is in the process of brainstorming marketing strategies and on the lookout for partners, investors and other organizations to help Pagapramim grow.