Embedded finance is powering the launch of all kinds of new companies and products around the world. Brazil-based Conductor is a digital banking and payments platform. It processes 1 billion payment transactions annually, totalling over $20 billion in payment volume, and serves over 250 clients with more than 85 million cards.
The company is expanding throughout Latin America after raising a $150 million investment round.
Chief Strategy Officer Marcelo Jacques joins me on the podcast to discuss the company’s expansion plans throughout the region, including how it will compete against foreign embedded finance platforms entering Latin America.
Latin American payments and banking
Conductor is a payments infrastructure provider in Brazil and Latin America. We started our business as an issue processor, processing from all types of cards from different networks: private label cards, prepaid debit, credit, you name it. We evolved our offering to expand and offer more solutions within the payments value chain.
So today, we offer payments processing, issuer and acquire processing. We offer banking as a service. Inside Conductor in Brazil, we have a regulated entity called Dock which is our subsidiary and is responsible for offering our banking as a service solution. On top of issuing cards, we enable our clients to offer payment accounts and digital wallets on a white label basis. We take care of the tech, the infrastructure, the regulatory, the network connections, and our clients just have to worry about doing their apps and focusing on CX and customer acquisition and the rest. They just plug into our APIs and go about their business.
We are originally from Brazil. This year, we started to expand outside to other Latin American geographies. We are already issue processors in Peru; we’re setting up in Colombia; and we’re setting up in Ecuador, as well. And we also have a transaction capturing platform that came with an acquisition that we did this year. It’s called Muxi. It’s already in Argentina, Mexico and Peru. So, we are in six different countries today — Brazil being the most relevant by far.
In Latin America, we’re seeing the increased digitalization of payments. Some markets are already quite digital. You have new use cases and new solutions, but people already have a lot of access to digital payments. But when you talk about them, there is still under penetration. Brazil itself is under penetrated. But if you compare it to other geographies, such as Mexico, we are actually higher penetrated in terms of digital payments than these countries.
We’re seeing that the big revolution that has been happening in Brazil is already actually happening, but in a more initial phase, in other countries. We want to be part of that growth and the development of these markets.
Big investment round
Our main growth focuses are to grow internally in Brazil and continue to grow at the rates that we’ve grown in the past. The company has grown at around 45% CAGR ever since Riverwood first invested in us in 2014. The market is still very big in Brazil. And we expect to continue to grow at similar rates in the next few years. The money [from our $150 million investment round] is going to be used in product development, product expansion and geographical expansion as well.
Scale in Brazil
To give you a sense of our relevance in Brazil, we process almost 30 million active accounts. Those are cards or digital accounts that are actually used during the month. So they’re active. This year, we went through processing over 100 million transactions. We’ve been almost hitting the mark of 5 million transactions a day. We’re probably going to hit that this week, hopefully with Black Friday.
And our volumes have been growing even more than our revenues. I mentioned that 45% CAGR in terms of revenues, but our transaction volume has been growing almost 70% CAGR for the past few years.
We grow along with our clients. And we have lots of digital banks and wallets that are showing explosive growth in Brazil. They are the challengers of the new market. We also have traditional players that use our platforms as well. So we’re very embedded within the Brazilian payments market.
Marqeta of Latin America?
We have an open API platform. So we have more than 600 APIs published for all the functionalities I mentioned, like debit, credit, prepaid, etc. The the way that we deliver technology and the mindset we have building our platform is to enable our clients to connect to the platform without having to depend on us, because that’s something that you think about traditional issuer processing of the past. Clients needed and were dependent on their issuer processor to change anything in their current program.
These challenger banks and these newcomers in the market — they have to be very responsive to customer demands and customer inquiries. So they have to be able to define their roadmap very quickly and change what they’re doing on their app. The value proposition here for our initial issuer processing capabilities is to actually enable them to do that without depending on us.
Embedded payments in gig economy
Some of our clients are gig economy clients. We have ride hailing and deliveries. Some of them are actually user platforms that issue, for example, a prepaid card for their end customer. Some of them use the platform to issue a prepaid card to their drivers to deliver.
Different use cases
We’re agnostic in terms of how our platform can be used. There are several different use cases we have. For example, companies that are in peer to peer lending use our platform’s APIs to control the money flow coming in from investors to going out to the merchant that’s taking the loan and controlling the receivables from the merchant. They use our banking as a service platform to control that. So that’s a use case that is not typical — if you think about an issue processor or a program manager, it’s not a typical use case because it’s not based on the card. Our client doesn’t even have a card associated with its payment accounts. You basically use us as a way to transfer money around.
We have telco providers that are creating payment solutions embedded in the telephone that they are selling to end customers. We have freight forwarders that are using our platform to pay their truck drivers.
Foreign payments infrastructure firms entering Latin America
It’s funny, because when you talk about payments infrastructure, this is a business that a few years ago, people didn’t even understand what we’re doing. Now, we’re mainstream and we have to talk about competition and people and other businesses popping up. So, it’s awesome.
When we think about our position in Brazil, I think one of our big differentiators is that we are an end-to-end provider. We can help companies on the issuing side. And we can also help a company set up their merchant acquiring business — we have software to enable companies to do that.
If competition comes in — it’s going to come because the market is so big and relevant — I think that we’re ready. The way that we think about competition is we have to always be one step ahead. So we are always thinking about launching new products, launching new solutions. And that’s how we deal with that.
I think there’s there’s room in the market for everyone. We don’t expect to lose share.