PicPay buys fintech to forge ahead in Brazil’s credit market

Times may be challenging for Latin American fintechs. But they also convey a sense of opportunity for big-sized companies with deep pockets.

This week, PicPay, one of the leading digital wallets in Brazil, announced a new acquisition to gain ground in Brazil’s trillion-dollar loan market.

The fintech – which reports 30 million monthly users — confirmed the 100% purchase of BX Blue, a payroll lending marketplace in Brazil. BX Blue brings in a million clients, primarily pensioners and public servants, and marks PicPay’s most recent foray into the country’s payroll lending market.

In a press release, a PicPay officer underscored the critical assets driving the decision to acquire Bx Blue. “(It) has both technology, market intelligence, partners, and an extremely secure digital platform,” Danilo Caffaro, Vice President of Financial Services for Individuals, said. “Incorporated to our ecosystem, it results in an enormous potential for us to scale payroll loans.”

A 500 billion reais loan market

Danilo Cafiero headshot
Danilo Cafiero, Financial Services Vicepresident at PicPay.

PicPay estimates the size of the payroll loan market at 500 billion Brazilian reais, or close to $100 billion. The goal is to diversify the credit portfolio amid high-interest rates in Brazil and delinquencies ticking upwards.

The payroll segment brings more low-risk products to the overall loan book, the fintech said in the release. PicPay already markets personal and credit card loans and a marketplace for P2P lending among companies and individuals.

Brazil’s collateralized payroll lending segment is traditionally more resilient to upswings in the economy. During the Covid pandemic, most of the major banks in the country pivoted to those safer assets. Now with a risk of a recession down the line, fintechs are also bracing for a grimmer economic performance.

Despite challenging times, the acquisition comes amid a moment of expansion for PicPay. Last month, it launched its peer-to-peer lending business for companies. The idea was to enhance the product suite and complement its P2P offering. Last year, it also launched a crypto exchange with crypto firm Paxos.

Partnership with Brazilian banks

Soon, the company said, the marketplace will be embedded into PicPay’s suite. Its customers will be able to seek payroll lending through the app. Bx Blue does not issue loans per se, but it is a market for clients to seek online financing from major banks in the country. These include Banco do Brasil and Bradesco.

“Banks will be able to access PicPay’s giant base, while users will continue to have the best loan experience now added to a wide(r) range of services,” Gustavo Gorenstein, co-founder of BX Blue, said in the release.

PicPay is owned by J&F Group, a holding company that owns Banco Original in Brazil. During the second quarter of 2022, the company reported a sharp spike in user growth from 55.4 million to 71.2 million at the end of July, up 29%. However, the company says 30 million active users every month.

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In 2022’s first half, total revenue reached 1.3 billion reais compared to 358 million in the first half of 2021. However, the company reported a 663.8 million reais loss, almost double the 354.4 million booked a year ago. The company is incurring in greatest costs as it seeks to expand its product offering and extract more revenue from its customers.

The company did not disclose the acquisition’s cost nor any other details on the deal.

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