RecargaPay Relies on Revitalization

Luca Nacucchio

Analyst

Founded on the premise of making financial services simple and accessible, RecargaPay’s journey from a humble beginning in 2010 to a one-stop shop in the industry is noteworthy. In Brazil’s rapidly evolving fintech landscape, few companies have enjoyed the consistent success of RecargaPay. With a mission to democratize mobile payments and financial services, the company has taken the Brazilian market by storm, offering innovative solutions to more than 6 million users from all backgrounds.

From Recharging to Revolutionizing Payments in Brazil

“Recarga” means “recharge” in Portuguese—and that’s because RecargaPay wasn’t focused on payments at first…it was about reloading cell phone credit. The company got its start with recarga.com, a website that allowed users to reload their mobile phones from the comfort of their homes. Users could select their country, carrier, and phone number, and then complete the transaction using a credit card. Back then Recarga served 10 countries, though currently it only focuses on Brazil.

This service was an immediate hit with consumers, but then the company realized it could help users with other types of payments, including public transportation, contas (bills), and more. What set RecargaPay apart was its determination to cater to a wide spectrum of users, not limited solely to those with lower incomes. In fact, the majority of RecargaPay’s users were (and still are) banked individuals who found the platform’s convenience and versatility compelling.

As RecargaPay expanded its reach, the company’s focus shifted to mobile app development. In 2014, RecargaPay launched its mobile app, which proved to be a game-changer. With heightened retention rates, increased transactions, and higher total processed volume (TPV), the company’s pivot toward mobile further solidified its position as a frontrunner in the mobile payments sphere.

“We have created a vertically integrated payment stack,” says Rodrigo Teijeiro, CEO of RecargaPay. “That has allowed us to build a very scalable and very efficient platform. And what we’ve done is that we offer the most inexpensive fees in the whole market. Since in the end, people want to pay for these things at the lowest costs, they tend to come to RecargaPay,” he explains.

Retooling Its Revenue Model

Despite the company’s success as it evolved from mobile top-ups to payments, RecargaPay had to keep evolving in order to grow. Initially reliant on commissions from telco providers, RecargaPay diversified its revenue streams over time.

While many customer-facing fintechs struggle to monetize, the company ventured into monetization through various avenues, including commissions from gift cards, top-ups, boletos bancários, public transportation, and lending. RecargaPay’s willingness to evolve its revenue model contributed to its strength and sustainability, especially as it shifted from its early cashflow-negative phase to a more financially stable position. Of course, the company also balanced relevance to users with its revamped revenue model: “RecargaPay is a single app that is for both pfs (pessoas físicas or real people) and pjs (pessoas jurídicas or companies), says Teijeiro. “So it’s for individuals, for consumers and for merchants as well.”

This focus on different types of customers means that that RecargaPay has had to commit to innovation and enhancing user experiences, so its team has to continually refine core products and improve the payment process for its diverse users.

Mixing in Pix

Another adjustment that RecargaPay has had to make involves Pix, the real-time payment system launched by the Central Bank of Brazil in 2020. Pix has rapidly gained traction in Brazil, as its transactions totals have surpassed those of credit cards in just two and a half years. With 93% of adults in Brazil embracing PIX, it has become a key avenue for RecargaPay’s growth strategy. By offering consumers the convenience of immediate, free, and interoperable payments, PIX has not only expanded RecargaPay’s user base but has also opened new avenues for innovation.

Teijeiro credits PIX with fostering healthy competition in the market. Rather than allowing one player to monopolize the peer-to-peer (P2P) market, PIX’s interoperability and immediacy have created a level playing field. RecargaPay’s strategic move to enable PIX payments funded by credit cards, including installment options, has further diversified its offerings.

“It was just the natural evolution of what we were seeing,” observes Teijeiro. “Because what we were seeing with PIX is that for the merchant, there’s an enormous incentive for the merchant to receive money via PIX instead of via credit card. Why? Because with PIX, the merchant receives the money immediately with no interchange cost and with no advancing cost and with no fraud…. At the same time, the customer wants to use his credit, they actually want to use the credit that they have in their credit card. So we allowed in RecargaPay the capability of paying a PIX but funded through a credit card.”

To that end, the company created the award-winning Pix Installment, a functionality enabling RecargaPay users to divide their payments using the Central Bank system, extending it over a maximum of twelve installments. The option to divide the transfer into installments is exclusively available through Pix using a credit card. Therefore, the funds being sent remain within the user’s wallet, while the credit card’s available balance is utilized. In simpler terms, this process resembles making a purchase in installments using the credit card, which have a 37% penetration rate in Brazil. This innovation aligns with RecargaPay’s mission to simplify transactions and provide customers with the flexibility they desire.

One Market, One Focus

RecargaPay’s focus on the Brazilian market is deliberate. Teijeiro explains that the decision to stop trying to operate in several markets in the region — 10 to be exact — and focus on Brazil is due to the country’s distinct payment landscape, which makes it an ideal environment for fintech disruption, considering that 96% of Brazilian adults have access to the financial system, 90% shop online and 87% own a smartphone. Also, according to him, every country has its own distinct set of rules, so leveraging on the previous success in one country does not necessarily translate well into another.

Embracing Open Finance

When it comes to this banking practice, Teijeiro is all for it — and emphasizes the importance of data ownership by consumers. He sees open finance as an opportunity for companies like RecargaPay to leverage customer data to enhance services and offer more personalized financial solutions. By capitalizing on open banking and utilizing AI technologies, RecargaPay aims to deliver even greater value to its users, from improved credit assessments to tailored financial offerings. Teijeiro likens the fintech landscape to Darwin’s theory of adaptation. In an industry marked by constant change, it’s not the strongest or smartest that survive, but those most capable of adapting. AI technologies, like chatbots powered by GPT-3, are playing a pivotal role in this adaptation. Teijeiro envisions AI as a tool for improving efficiency and productivity, enabling companies to achieve more with smaller interdisciplinary teams. AI’s potential lies not only in reducing costs but also in driving innovation by tackling tasks that were previously resource intensive.

Recharging Itself

In the turbulent waters of the fintech industry, RecargaPay’s journey underscores the importance of staying true to core values, embracing change, and leveraging technology to deliver accessible and innovative financial solutions. The company’s unwavering commitment to accessibility has driven its evolution from facilitating simple mobile top-ups to offering a diverse range of convenient payment solutions. As the company continues to expand and explore new opportunities, its commitment to enhancing user engagement, consolidating existing products, and adapting to industry changes will position it for sustained success and continued transformation.

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