The world is familiar with bitcoin being used for many things. Online payments, long-distance remittance, even a substitute for gold. But what about credit? Not so much — and that’s where BitPagos, a startup competing in the Battlefield pitch competition at TechCrunch Disrupt New York, wants to make its mark.
The Buenos Aires-based company, which has raised funding from Draper Associates, Digital Currency Group and others, started out offering a bitcoin wallet which, like others, enabled consumers to turn currency into bitcoin and vice versa, while also paying for goods online using bitcoin.
Bitcoin has proven popular in Argentina and other parts of Latin America where local currencies are subject to crazy depreciation, to the point that bitcoin provides a more stable and viable option for storing and moving their money.
However, the BitPagos team sensed a new opportunity that does — and doesn’t tap — into bitcoin. Using the blockchain, the digital ledger that underscores the cryptocurrency, it created a payment system that enables users to buy goods online without the need for a credit card, or credit check. But no actual bitcoin is involved for either merchant or buyer.
That’s hugely important in emerging markets because credit cards, the most obvious way to buy online, are not universally owned, and alternatives like paying cash on delivery are inefficient and subject to high cancellation rates. In Latin America, for example, credit card ownership is below 20 percent, while many millions are unbanked altogether — i.e. no do not even possess a bank account.
The World Bank previously reported that “most” people in the region stash their money under their bed, and, on the credit card front, even getting the requisite data to apply for a card is difficult.
Ripio Credit is BitPagos’ system that allows those who are unbanked or without a credit card to buy online.
Customers first provide a few pieces of information — including their national ID, social media presence and address — and the company said its system can check them for credit within the day if not sooner. (Those that use the BitPagos’ bitcoin wallet can be approved instantly because they have a payment history.)
Once approved, a customer is offered a number of payment options, which could include delayed payment — e.g. end of the month — or a staggered plan, such as installments each month for six months.
BitPagos makes money by offering slight premiums on these payment plans, but since the transaction is handled within its system and not the usual clearing and credit houses, which adds cost to a transaction, it can offer far cheaper interest rates to customers.
The startup doesn’t share that revenue with merchants, but they win in other ways.
With online estimated to account for less than two percent of all commerce in Latin America, these types of solutions are hugely important for any company selling online because it helps remove a major barrier that limits their revenue and can grow their pie.
Ripio is initially available in Argentina, but the company plans to expand to Brazil next, before reaching other parts of Latin America. CEO Sebastian Serrano, a serial entrepreneur who once worked for Argentina’s ministry of finance, said that emerging markets like Africa and Asia, where banking and credit card adoption is also low, could be potential options further down the line.