Fintech firm Ualá takes mobile payments to small businesses

Ualá, the mobile payments company backed by heavyweight investors including George Soros, Steve Cohen and Tencent Holdings Ltd, is expanding into merchant services in Argentina.

The company is launching Thursday a variety of services that cater for the first time to small businesses, said Ualá’s founder and chief executive officer, Pierpaolo Barbieri. Ualá will start offering mobile point-of-sales (mPOS) units, looking to deploy 100,000 by the end of 2021, as well as allowing small companies to charge via payment links.

“As of Thursday, we stop being a payments app and start becoming a full payments ecosystem, moving beyond individual accounts and services to small businesses,” Barbieri said by phone. “This closes the loop on Ualá.”

Ualá, which provides a slew of financial services based on a prepaid card managed through a mobile app, has issued over 2.5 million cards in Argentina since it started operating in 2017. The company launched operations in Mexico in late September and is already issuing over 1,000 cards a day there, Barbieri said.

Fintech services have boomed in Argentina over the past year, as the coronavirus pandemic leads consumers to embrace alternatives to cash, often for the first time. Still, the country has one of the lowest penetrations of financial services in the continent, with cash used for 87 percent of all transactions even when accounting for the impact of the pandemic, according to a McKinsey report released in October.

Ualá is not the only company looking to take advantage of the opportunity. An alliance of 30 local private and public banks are launching their own fintech app, MODO, this week, which comes on the heels of the roll-out by Banco Santander Rio SA and Grupo Supervielle SA of their own versions of mPOS units. All those will likely add pressure on MercadoPago, the fintech arm of e-commerce giant MercadoLibre Inc, which has historically been the main player in the Argentine fintech space.

Barbieri says the Ualá offering is well-placed to compete against the flurry of new and existing products because it will allow small businesses to access the funds immediately – rather than as long as two months, the industry standard – and thanks to commissions that are 30 percent cheaper than its competitors. That’s key in a country where annual inflation of around 40 percent means companies need cash as soon as possible.

“We think it’s a revolutionary pricing in a market where there has been little competition,” he said. Small businesses in Argentina have “a disincentive to go digital” as competing platforms are expensive and slow to turn around on payments, said Barbieri.

The company, which looks to hire another 500 people and continue scaling its operations in 2021, says its growth push is already fully financed thanks to its 2019 Series C funding round, in which it raised US$150 million led by Chinese internet giant Tencent and Japanese conglomerate SoftBank Group Corp. Soros, Cohen and Jefferies LLC were also among early backers for the company.

Barbieri said he aims for the company to break even in Argentina by 2022, a goal that is on track despite the challenges of operating under the coronavirus pandemic.