The MoneyPot Live: Bridging Markets - The Future of Financial Services

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In this episode, we speak with Ray Chalub, Chief Operations Officer of Inter & Co, to take you on a journey from the bustling streets of Brazil to the financial corridors of the United States, as we explore how they are pioneering a new financial paradigm.

Discover how this innovative fintech is transforming its business model to bridge the gap between emerging market scalability and the complex demands of the U.S. market. Our speakers share their insights on how remittances are unlocking the potential of Inter&Co’s financial super app, paving the way for a multi-vertical ecosystem that caters to diverse consumer needs.

We delve into the strategic moves that have positioned Inter&Co as a trailblazer in the global fintech landscape, offering a glimpse into the future of financial services. Whether you're curious about the dynamics of cross-border financial operations or the evolution of super apps, this episode is packed with valuable takeaways for anyone interested in the future of money.

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Chapters

• 0:05 Exploring Digital Banking in Brazil
• 12:07 Super App Strategy for Global Expansion

Transcript

Ian Horne: 0:05

Hello and welcome to the Money Pot. We're recording this one live in Las Vegas at Money 2020, usa, and the energy is palpable. I'm Ian Horne, european Head of Content for Money 2020, and I'm co-hosting with the fantastic Rachel Morrissey, our US Head of Content, sorry and architect of most of the excellent content that's been taking places on our stages this week. Rachel, we're going to go on an audible journey to South America today. I'm so excited. An audible journey. You just needed more flights. After going to Vegas, I figured we needed to get you traveling more.

Rachel Morrissey: 0:37

That's exactly right.

Ian Horne: 0:38

And we're probably going to take in some more stops on the way too. So don't get you know it's going to be big. So anyway, are you ready to go?

Rachel Morrissey: 0:44

I am ready.

Ian Horne: 0:49

Fantastic, let's go, then. Today we've got Ray Chaloub joining us on the Money Pot. Ray is the Chief Operations Officer at Inter Co and he's going to talk us through how we can bridge the gap between emerging market scalability and the complex demands of the US market. It's a cross-border conversation and it's also going to cover the evolution of super apps. Really interesting stuff. So, Ray, welcome to the show.

Ray Chalub: 1:07

Thank you so much, ian, very happy to be here. Hey, rachel, hello, let's talk business.

Ian Horne: 1:12

Let's go Absolutely. Well, let's get started with telling us a bit about Inter Co and your role there. What do you do? Absolutely.

Ray Chalub: 1:18

So Inter Co is one company that serves 33 million customers, as of today.

Ray Chalub: 1:26

And we have 33 million customers 33. That's impressive because it has been just a few years since we have been on this digital full journey, and our goal is to make people's lives easier, and when we do that, it is through simple things like allowing people to open a bank account through their cell phones, having the easiest investments as possible, selling them gift cards, helping them on the inflation throughout, cashbacks and a lot of things that we do there. And then we started this journey in Brazil. We had just like 1,000 customers by 2016. And then we developed this digital banking platform and now we have the responsibility to serve 33 million people in Brazil, united States and on the next steps in the world.

Ian Horne: 2:24

Yeah, really quick question that first 1,000 customers. How do you get them on board? What was your value prop?

Ray Chalub: 2:30

At first, that's a great question. Thank you for that. At first, the value prop to have these customers was just high yield on investments, and then we shift from this only value proposition to servicing the customer with a lot of features like investments, insurance, credits, non-financial services and a lot of financial services and nowadays, of course, cross-border services, credit cards and et cetera.

Rachel Morrissey: 2:58

So what inspired, that change? What inspired you to take that method to grow?

Ray Chalub: 3:07

That's a great point, by the way, because, uh, we are truly a customer centrist, centric company. So we wake up every single day thinking how can I make my customers life a little bit more easier like one percent every day, one percent every week or one percent every month, sometimes, that that's. If that's the case and this change came from inside out. So we were. We never saw ourselves as only a bank. We have ever. All the time that we work towards developing something, we are also thinking about how can I scale this to the masses and make people's lives easier. So, for example, in Brazil, we offer, like parking solutions or car fueling solutions, and this is all to try to accommodate everything that one needs on their daily life into their financial app.

Ian Horne: 4:04

And, yeah, let's talk more about Brazil, because it's an economy that's increasingly digitalized. I mean, pix always sounds like such a success story and, as you're mentioning, there's all sorts of new ways you're meeting the customer wherever they are. Yeah, how have you grown along with the country's digitalization?

Ray Chalub: 4:20

That's a great point because the PIX history is much similar with the Inter history, by the way, because when we started the digital bank in 2016, we just didn't believe that those high fees on moving money, they would be in place for a long time. So we have seen the flourish of a lot of great systems in the world real-time payment systems like PIX, like UPI, like several others. So we built our model before PIX. We even had one proprietary version of PIX. We used to call that InterPag and it was a piece of beauty. On technology Technology is the same, by the way and then when this P peak solution came around, the Brazilian digitalization of the economy just rose a lot and Inter was perfectly positioned to help the population to catch this wave.

Rachel Morrissey: 5:15

Okay. So you were in position to catch the wave. You were in 2016,. You had 1,000 customers. What was the first add-on that you did? You were like I have a digital bank. What was the first add-on that you did? You were like I have a digital bank. What was the first thing that you were like I'm going to add this additional service. Where did you go first?

Ray Chalub: 5:32

So basics first, the first thing that we've done the digital account, opening a debit card, a credit card, and some features that were very innovative at the time, like setting your PIN setup throughout your cell phone.

Ray Chalub: 5:52

This is obvious today, but Inter helped to set this as a standard. So we began with the basics and then we kept adding a lot of more features, a lot of more features, a lot of more features. For example, we do offer one shopping platform where the customer can buy installments, the customer can buy services or goods. So this is the kind of feature that we would like to keep adding, so the customer can see Inter as a supermarket. So whenever you get into a supermarket, you can buy a lot of things, but you don't need to buy them all. You buy whatever fits you. And as we are a digital business, we have a lot of data and we have a lot of heat maps and we are obsessed about the best customer journey. A lot of heat maps and we are obsessed about the best customer journey, so we really tailor suit these features to the best customer experience.

Rachel Morrissey: 6:51

So, as you said, you have customers in Brazil, you have customers in the United States, you have customers in other places. What's the percentages Like? Where are you finding the biggest? I'm assuming your biggest customer base is in Brazil. Where are you finding the biggest? I'm assuming your biggest customer base is in Brazil. Where are your other big customer?

Ray Chalub: 7:07

bases. Our biggest customer base nowadays it is in Brazil. It is from where we started right, but this is not going to be the case for the next years or decades to come. So first is Brazil, then we have accounts in the United States. Inter already offers accounts in the United States for 3 million people, the majority of them, they are still living in Brazil. But we also have a couple of hundred thousand accounts for American residents, and then the current plan is to scale this up. And then we seek to serve the us population with their basic needs and keeping and are going to keep adding features to that. And, by the way, we're not going to be only in brazil and in the united states. We have been building a platform that is scalable enough to serve worldwide, and this is our goal, our destiny, our call is to be one truly global account. This is why we wake up every single day to serve the customer in the world.

Rachel Morrissey: 8:18

That. I mean that's astounding. When I think about super apps in the United States, though, they don't feel like they're very successful here the way that they are in Asia and the way that they seem to be growing in LATAM. So when we talk about super apps in Latin America there's a few you guys are one of the major players. What do you think it is about the super app that has been so successful, like why do you think in LATAM it's so successful as it is in Asia? Is it because it's a digital first market, or why is that so attractive?

Ray Chalub: 8:55

It's really a combination of a lot of factors. So, being a digital first market, of course that helps a lot and we are aware that it's not simple to pull off to be a successful super app in the United States. And our goal is to serve the customer with a top-notch user experience for the basics, for the account, for the cart, for investments and et cetera. And then we're going to, in a smart way, keep adding features. We're going to, in a smart way, keep adding features. So once the customer buys something at one merchant, instantly we can send a push to this customer.

Ray Chalub: 9:33

If he had made this purchase through a debit card, and we can say to him inform him, if you had bought one gift card from Inter to buy this, you could have saved like 90%. You could have a 90% cashback. Would you like to have that for your next purchase? Then we help the customer on their daily lives and we increase the amount of products that this customer uses from Inter. So this is our strategy to keep the basics simple, exceptionally well attended and then keeping adding features that are relevant to that customer. As we have a lot of data and hit map. Yeah, that's something that you can do.

Ian Horne: 10:20

It seems to me one of the key things is how comfortable users are in a certain region with using their cell phone for accessing their finances. Is that essentially key?

Ray Chalub: 10:30

absolutely, absolutely, and we see this phenomenon all over the world. So we get that the Americans they do have one unique relationship with their banks, Because here in the United States we have like thousands of banks. That's not the case in a lot of other countries that our platform is able to act in different geographies. So if we want to serve customers in the United States, as we propose ourselves to do so, yes, we have the right tech, the right people and the right resources to do that. That might be the same thing for Europe, for example, or even other geographies.

Ian Horne: 11:10

Yeah, I think there's something around customer confidence there, both in terms of using their phone for their finances, but also in terms of trusting a neobank, because obviously the UK in particular, but also in parts of Europe, we've seen the growth of super apps to a poor not super apps, but neobanks where you can use an app. Yeah, and I'm wondering are people using you as their main bank account, or is it just something new they can use for something like FX or one of the services that you've got?

Ray Chalub: 11:35

Absolutely. That's a great question and, as a public company, we do have this data in our investor relations website and what we see in a daily basis is the increase of people that use Inter as our primary bank, so we can check even this data to this podcast. But more than 50% of our active customers use Inter as their primary bank.

Rachel Morrissey: 12:02

That's actually their entry point. They're actually I mean, that's one of my big questions. When you start using something like a super app, where is your entry point? Are you coming, as you were pointing out? Are you coming in because of some side service and then eventually adopting over into being a bank customer? Or are you coming in as a bank customer and then gradually having that app sort of dominate your experiences with shopping and with other services? So how does the customer journey work Like when you are looking at it throughout your system?

Ray Chalub: 12:38

That's the beauty of it. We can come from both angles, by the way. So let's say, just out of example, that one geography or one demographic has the demand for sending money abroad. The customer can simply download InterApp, then register and then simply start sending money abroad. After a while, as the customer gets used to this top-notch user experience, then the customer might be asked to open one bank account or have one debit card, credit card. Why not invest so in several vehicles that we offer? By the way, why not do a mortgage with Inter? Why not buy the gift card? So we have multiple entry points, and using the data in the right and smart and respectful way to the customer is the right way to go here.

Ian Horne: 13:37

Yeah, and is the super app approach essentially your competitive advantage? Because I'm trying to think who your competitors are in this space. My first thought would be like NewBank, right, yeah. So what distinguishes you from your competitors?

Ray Chalub: 13:49

So there are a lot of competitors with highly skilled personnel, with a lot of great value propositions, by the way, and the financial market. Throughout the years we have been serving the world with great companies right and great competitors. So they all have their strengths and we know that we have ours also, and we know that we have ours also. So among our strengths is the ability to serve the customer with easy-to-use products. So we have all this complexity that the financial services demand and all the security and all the CIP, aml, qic, all of those processes. We do that in a seamless way to the customer and then this is one of our most important advantages.

Ian Horne: 14:41

Yeah, that was a lovely diplomatic answer at the start. There I've got to say as well, that was really really nicely done.

Rachel Morrissey: 14:47

I was going to say wait, wait, are they competitors?

Ian Horne: 14:51

Yeah, it sounds like your friends, but yeah, I guess another thing is obviously super apps. You're constantly building out the service. How much of things do you control or are you trying to partner with third parties or other fintechs to build out what you do like? What's your growth strategy for building out the super app?

Ray Chalub: 15:07

and that's a great point and we have a very simple approach to that. Whatever we generate value to the customer, we want to develop that from ourselves. Whatever is not generating value to the customer or it is a commodity, then we don't invest our major resources on that. So, for example, for a lot of back-end solutions we do need the regulatory compliance. We do need all of the robustness. Then we rely on partners, but all of the user experience, the middleware, the data usage, that is our competitive advantage. Then we develop that in-house from ourselves. And to your prior point about all of us being friends there is actually some areas where all the financial institutions they are friends, they are cooperative, like when we are talking about AML or anti-fraud. We get to cooperate a lot so we can learn to make a safer environment that is best for every one of us.

Rachel Morrissey: 16:17

So, yes, we are competitors at some point and also we are friends at another well that earlier you were talking about, uh, how you you focus everything around the customer. It's completely customer-centric, and you were just saying that, uh. So my question is how do you begin to determine, like, what are the factors of what is getting your customer something? And do you have an example of something you cut or stopped doing because you didn't feel like it was very customer-centric?

Ray Chalub: 16:52

Absolutely so. We have done a lot of great things, right things, and also we have our fair share of mistakes also. Absolutely so. It's like when Netflix knows when the customer is hooked, it's when he watched or she watched a lot of episodes from TV series and etc.

Ray Chalub: 17:18

binge binge watch and then our binge is when the customer starts to spend on the debit or credit card more than 10 transactions per month, or when the major part of their income becomes an interdeposit. So these are just two examples where we can see that we can binge with the customer.

Ian Horne: 17:50

Yeah, and what's the hook when they're doing that? Obviously they're using your account. Lots of payments. What kind of loyalty benefits do you give them? How do you keep them engaging with you?

Ray Chalub: 18:00

That's a great point, because it is not enough to offer this top-notch user experience. You've got to give back rewards right, and we do have one program that's called Loop, and every journey in our app the customer receives loop rewards and loop points or cash back. So these loop rewards the customer can exchange for money, can exchange for cash back and et cetera. But we do believe that the top-notch user experience, with all the robustness and safety of being a bank in Brazil and being used to be regulated with these benefits, these are foundational aspects for us to gather the customer confidence.

Rachel Morrissey: 18:43

That's amazing, I mean. I think it's great, I think it's really interesting to think about how, but you didn't tell us about one of your failures.

Ian Horne: 18:55

Yeah, he's good at this, isn't he? Yeah, I was like wait wait, wait.

Rachel Morrissey: 19:00

He didn't tell us about one of the times that he decided to cut something because it wasn't working anymore.

Ray Chalub: 19:06

I'm going to share one nice story without revealing the names.

Rachel Morrissey: 19:10

Okay, not revealing the names is like the name of the game here. Yeah, absolutely Okay, not revealing the name of the game here.

Ray Chalub: 19:14

Yeah, absolutely so. We are accountable for 10% of the Brazilian market share for SMBs, so that's a huge responsibility. And when we are working on improving our product, we just look at the downsides every single time. So, oh, we do things like this, but the competitor is doing from a different angle and their grass is just greener right. And then one of these competitors one day they came to our headquarters and they were like oh, how do you do this special feature on the SMB's product? And we are just not able to do that like you. And we were like really, we think that yours way is much better than ours, so we were having a wrong analysis here. And then, jointly, we reached the conclusion that we just had different targets, audiences, and then, whenever we are too focused on our problem, it's always good to have a fresh pair of eyes.

Ian Horne: 20:30

so this is one example and let's go back to your growth plans, because it's really interesting how much of the the stack you're trying to kind of own front to back and also go global, which is, you know, these are big plans. But the one I want to look at now, seeing as we're in Vegas, is how you're going to go going big in America, because everyone wants to break America right.

Rachel Morrissey: 20:47

I've seen already spoken like a true Brit.

Ian Horne: 20:51

Of course, we just get excited by everything that happens here. I don't know why. I think it's genetic or something. Anyway, yeah, I've seen that you've already started with the Brazilian diaspora. You sponsored a football or soccer club. If I have to, that's a great way to appeal to a Brazilian audience. I see that. But beyond that point, how do you intend to get into the kind of mainstream American market?

Ray Chalub: 21:14

To your point, a lot of companies. Throughout the past few decades, they tried to come to America and I'm going to intentionally use the wrong term here and try to conquer the American market at their own segments Right. And then the American players and the American regulators they all learned about that because a lot of those companies that were successful in their home countries, they were a failure here. So the first assessment that we take is that we are one successful player, not the only, in our home country. We do have our strength and there are a lot of things that we need to catch up on in order to offer the same top-notch service that we do offer in Brazil, that we want to offer in the world and in the United States.

Ray Chalub: 22:13

So the major takeaway that we have been observing is that, regardless if you are a success in your home country, when you come to the United States, all that the American regulators and partners care is who you are in the United States. So first things first. We tell our story. They were like. They are like okay, but please fill up this form here, give me this due diligence package, have this collateral money here and give me my fee. So this is the way that the American partners have been working with companies To your point. We are expanding first to the United States, and then, of course, we are going to expand for other geographies, but in the United States our first go-to market is Brazilian diaspora and Hispanic diaspora.

Rachel Morrissey: 23:13

That's actually a pretty big diaspora. That's a pretty big diaspora In the United States that's not a small contingent anymore, and I imagine so, when you guys have looked at the data for that particular population in the US, what are you finding about how many financial services they already have? Or are you going into a market that feels really underserved? Because I actually don't know.

Ray Chalub: 23:39

It is really difficult to get into a direct competition with tier one banks. So what makes more sense is to serve people who think or who feel underbanked and underbanked is not the one that doesn't have a bank account. That individual might have a bank account but feels underbanked, feels that they could be better served. So this is the first step of the strategy. And, additionally, those customers that are already served by those tier one banks. They might have one necessity about sending money abroad, about investing or even having a mortgage with a different partner.

Ray Chalub: 24:29

So we come from these both angles here to growth in the United States. So the customer that has already a primary relationship with a bank for decades. We don't mind in being the second banking relationship or that specific product relationship, because we are built as a low-cost-to-serve platform in order to offer a free bank account, in order to offer a free-of-charge debit card and credit card. So we are used to have this efficient operation and we are used to try to develop this kind of relationship with the customer where we are their primary bank or where we are just one service usage, and that's fine also.

Ian Horne: 25:17

Yeah, I mean, is lending a big opportunity there, because underbanked clients often have a lack of credit history, so is that something you're targeting specifically?

Ray Chalub: 25:24

Absolutely, and the CFBB last week just released one update on the Section 1033. That is going to be big on pay-by-bank and it's going to be big also in open bank and on sharing this financial information, and we're going to see a lot of different kinds of competition in the market and this is going to be great for players like Inter, for example. So we hope that we are ready by then. We are going to be ready by then and then let's hope for the best of the market and we are pretty sure that the customer is going to have a lot of more options than they do have today.

Rachel Morrissey: 26:02

That's wonderful. Well, best of luck to you. We have run out of time, so, ian, do you want to do the wrap-up?

Ian Horne: 26:09

Oh, I can absolutely.

Rachel Morrissey: 26:11

I would love that.

Ian Horne: 26:12

Okay well, thank you, ray, for joining us on the Money Pot. It Okay well. Thank you, ray, for joining us on the Money Pot. It's been a pleasure having you here and you've taken us on a journey from Brazil to America, which is probably more exotic for me than it was for Rachel, but I had a really good time Great talking with you about super apps and everything surrounding that. Also, a big thank you to our live audience here in Vegas. It's been great having you here. Thank you to everyone listening to this podcast at home as well, or wherever you are in the world. If you'd like to pitch an idea for the Money Pot, send us an email at podcast at money2020.com, and don't forget to subscribe to the Money Pot on whichever platform you use. We'll be back with another episode soon and hope you can catch us for the next one.