Polígono Capital — the joint venture between BTG Pactual and Prisma that bought funds from Captalys — is investing BRL 250 million in an FIDC from Vivo Money, the telecom operator’s credit vertical.
These funds will be invested over the next 24 months as Vivo originates new loans for the fund.
The expectation, however, is to consume the resources in a shorter period of time, Vivo’s strategy and new business vp, Ricardo Hobbs, told the Brazil Journal.
“There is no pressure and it has to be done in the best risk/return parameters, but I think it should be faster than that, given that we are going to accelerate our origination,” said the executive.
Vivo Money currently has a credit portfolio of R$ 275 million, whose loans were made with its own capital. Per month, the company is generating an average of R$ 25 million to R$ 30 million.
According to Hobbs, Vivo opted to start the credit business with its own capital, two years ago, to test and fine-tune its credit models, which were developed from scratch in-house. Now that the machine is oiled, she decided to bring in investors.
“As we have a lot of data from our customers, for example, their cell phone usage pattern, we are able to make a better risk assessment,” said the executive. “We went through a very troubled moment in the market and managed to maintain a prudent ratio of loss rate and interest rate, and with a very acceptable level of profitability.”
Vivo does not disclose the default rate of its portfolio, but Hobbs says that the number would put Vivo Money in the first quartile of the market.
Another advantage of Vivo Money is that the operation has a very low CAC (customer acquisition cost) compared to traditional fintechs.
That’s because much of the origination comes from the company’s proprietary channels—the brick-and-mortar and online stores. Vivo has more than 70 million paying customers, of which 22 million log into the company’s app every month.
“Typically these traditional fintechs buy media on social networks and Google and spend around BRL 100-BRL 150 per customer conversion. Our cost is virtually zero, it’s just the opportunity cost,” he said.
Part of Vivo Money’s expansion will come from new products: the company intends to launch a FGTS prepayment product, enter into payroll loans and collateralized loans. To finance these new offerings, Vivo must raise new FIDCs.
In addition to Vivo Money, the operator has other financial services in its portfolio, including a digital account, a credit card in partnership with Itaú, and cell phone and bicycle insurance.
According to Hobbs, all these products will be unified under the same umbrella, which will be called Vivo Pay.
“The customer will be able to pay with Pix, use the virtual credit card, recharge the prepaid and take out loans, all in the same place. And he will have the benefit of ‘Gigaback’: for every action he takes on the wallet he will accumulate gigs, with a limit of 20 gigs per month,” he said.
In the second quarter, these financial services already generated R$95 million in revenue for Vivo, with loans accounting for most of the amount.
The focus on financial services is part of Vivo’s strategy to diversify its source of income beyond telephony. Among other initiatives, the company recently invested in a JV with Ânima and closed the purchase of Vale Saúde.
The move is in line with the strategy of other global telcos whose results have validated the thesis.
In South Africa, MTN — the market leader — is working on a carveout of its financial services unit that could value the business at more than $5 billion. In Saudi Arabia, STC (Saudi Telecom Company) created a vertical that has also reported robust results, with more than 8 million customers.
“This R$95 million revenue is a tiny part of the market and the potential we have to capture. It’s a fast-growing business that has enormous potential to create value for the company,” said Hobbs.
Peter Arbex