When it comes to emerging markets, the opportunities to innovate in the financial services sector are nearly endless. Massive segments of the population are unbanked or underbanked, and those who are part of “the system” routinely face exorbitant fees and subpar experiences.
It’s this latter group that caught the attention of Argentine entrepreneur Sebastian Serrano. Merchants in Latin America struggle to accept international credit cards, often paying upwards of 30 percent in fees and currency conversion losses, while waiting as much as three weeks to receive payment from their processor. That’s before worrying about crippling inflation.
With this in mind, Serrano and his two co-founders created BitPagos, a payment gateway that accepts bitcoin and credit card payments and pays out to merchants in local currency or bitcoins – in all cases looking to minimize fees and maximize speed. BitPagos allows merchants to process international credit card payments at low US rates and then receive payout in bitcoin (at market rates) within two days. Merchants pay a flat 5 percent fee on all credit card transactions and pay nothing to accept bitcoin.
The company, which targets tourist-focused businesses like hotels and restaurants, is exiting a nine-month private beta with merchants in Argentina, Chile, Brazil, and Ecuador, and soon plans to expand into Venezuela and across South America. In May, the company processed $150,000 in payments, up more than 85 percent from the $80,000 level just two months prior.
Today, BitPagos announced $600,000 in Seed funding led by Pantera Capital with participation from Draper Associates, Barry Silbert’s Bitcoin Opportunity Fund, and several angels in both the US and Latin America. The company is a graduate of the San Mateo-based Boost.vc accelerator (which focuses heavily on bitcoin) and also the Buenos Aires-based NXTP.labs accelerator. The company currently divides its operations between Palo Alto and Buenos Aires.
Expanding into multiple emerging markets in parallel has its challenges, Serrano admits. BitPagos is constantly educating merchants on the benefits its service can offer while reassuring them on the uncertainties of dealing in crypto-currencies. It’s a market-by-market process that begins with installing feet on the street to generate early awareness and then letting word of mouth take over. BitPagos is currently building out its inside and outside sales teams to tackle this massive opportunity.
Some local merchants have begun holding bitcoin hoping to see it appreciate, Serrano says – a dangerous game of speculation – while others convert quickly into local currency. In Argentina and other inflation-ravaged countries bitcoin routinely sells at a pretty substantial premium (occasionally as high as 60 percent) to the rest of the world making it an attractive and potentially lucrative intermediary between international and local currencies. In almost all cases, accepting payment in bitcoin is cheaper than paying to process international payments.
There are approximately $60 billion in international payments made by consumers across Latin America each year. It’s a big market that’s likely to attract the attention of payment giants like Visa and PayPal eventually. But for the time being, BitPagos is the lone player in this category and is intent on sprinting out to a substantial lead before its service becomes commoditized. Longer term, Serrano, a Latin American payments veteran, hopes to build a trusted brand that can deliver additional financial services like insurance, lending, and so on.
With less than $1 million in Seed funding, one might assume that BitPagos has a limited runway with which to build this company before running out of cash. But with the combination of growing revenue and the low cost of technical talent in Buenos Aires, the company has more than a year’s worth of time to reach profitability – something that Serrano believes he can achieve at $1 million in monthly processing volume – or raise more capital. In the meantime, he hoping to grow the company’s profile among merchants and investors alike.
It’s easy for Americans and citizens of other first-world countries to assume that banking is comparable across the world. Nothing could be further from the case. There’s a massive opportunity available to entrepreneurs willing and able to tackle this problem. BitPagos has identified a major pain point and appears to have crafted an effective solution. Now all it needs to do is let the world know.
- BitPagosThe Future of Payments
BitPagos is bringing easy electronic payments to Latin America.
BitPagos is the first payment gateway focused on Latin America which accepts credit card payments and pays out to merchants in Bitcoin while charging a fee.
This unique and groundbreaking approach reduces fees for faster, simpler, safer transactions with international customers. In many cases it's allowing merchants access to credit card processing where previously it wasn't feasible while at the same time providing a much better user experience for the paying customer.