Pomelo Raises $9M for LatAm Fintech Payments Infrastructure

Pomelo Secures $9 Million Seed Funding for Fintech Infrastructure in Latin America

Pomelo, a burgeoning startup focused on delivering a fintech-as-a-service platform, has successfully completed a $9 million seed funding round. The company is specifically targeting the Latin American market.

Building a New Financial Infrastructure

Based in Buenos Aires, Pomelo is developing a novel infrastructure designed to streamline the launch of virtual accounts for fintechs and companies involved in embedded finance. It will also facilitate the issuance of both prepaid and credit cards through standardized and “compliant” onboarding procedures.

The Rise of Digital Payments in Latin America

The COVID-19 pandemic significantly accelerated the shift towards digital payment methods globally, and Latin America has been no exception to this trend. Despite the continued prevalence of cash transactions, the region boasts a substantial base of over a billion cards currently in circulation.

These cards account for an estimated $900 billion in annual payments volume. However, Pomelo highlights that a significant 95% of these transactions are still managed by established local financial institutions.

Addressing a Critical Market Gap

The company’s founders identified this reliance on incumbents as a key challenge, stemming from their own experiences in previous roles. They aim to resolve this issue by constructing a modern payments infrastructure.

“Launching a fintech, and particularly issuing cards, in Latin America presents considerable difficulties, based on our past experiences,” explained Gaston Irigoyen, Pomelo’s co-founder and CEO. “The process of launching even a basic prepaid card can take between 12 and 18 months, and companies often find themselves repeating this complex process for each new market they enter.”

Pomelo’s Vision for Faster Fintech Development

Pomelo’s core objective is to alleviate these hurdles by creating a next-generation financial services infrastructure. This will empower businesses to develop and launch card programs “much faster” across Latin America. Despite being only three months old and still in the pre-product phase, the company’s ability to secure substantial seed funding is noteworthy.

A Team of Industry Veterans

Several factors contributed to the success of this funding round. Notably, the three co-founders bring extensive experience from leading companies such as Mastercard, Google LatAm, Mercado Pago, and Naranja X.

CEO Irigoyen previously held an early position at Google LatAm and has a track record as a successful third-time founder with two prior exits (including one to TripAdvisor). He also served as CEO of Naranja X, Argentina’s largest neobank, serving millions of customers. Juan Fantoni formerly directed fintech initiatives at Mastercard, overseeing issuing agreements with numerous major corporations. Hernan Corral was the CPO of Naranja X and previously led digital accounts & cards at Mercado Pago.

Strong Investor Support

The funding round was co-led by U.S.-based Index Ventures and Brazil’s monashees, with additional participation from QED’s Fontes, SciFi (Max Levchin’s fund), Latitud, Future Positive (Biz Stone’s fund), 20VC, Addition, FJ Labs, and a16z’s Angela Strange. Furthermore, founders from Marqeta, Rappi, Auth0, Kavak, Loft, and RecargaPay also contributed.

Comparisons to Existing Fintech Solutions

Irigoyen draws parallels between Pomelo and U.S.-based fintech companies like Galileo, Marqeta, and Stripe, suggesting a similar approach to building its platform.

Investor Perspectives on Market Opportunity

Caio Bolognesi, a partner at monashees, emphasized his firm’s strong belief in the potential of financial infrastructure. They were particularly attracted to Pomelo due to the founders’ deep industry expertise and the demonstrated need for a superior solution within their portfolio companies.

Mark Fiorentino of Index Ventures echoed this sentiment, highlighting the crucial importance of founder-market fit in their investment decision.

“The founders possess the ingrained understanding of the most prominent payments companies within the LATAM fintech ecosystem… and have directly experienced the challenges, identifying this opportunity through firsthand involvement,” he stated.

Latin America: A Unique Market

Fiorentino also underscored that while the demand for embedded financial products is growing in Latin America, the region differs significantly from the U.S. market.

He noted that current solutions in Latin America are either “outdated” systems from traditional financial institutions or “inferior” offerings from U.S.-based incumbents.

“Launching a plastic or digital card can take over 12 months. Moreover, pricing from most legacy processors is inflexible and costly, as they are often owned by banks or established financial institutions. Reliability has also been a persistent issue,” Fiorentino explained to TechCrunch. “Pomelo is developing a developer-focused, self-service API solution to address this clear market need.”

Future Expansion Plans

Pomelo intends to utilize the new funding to establish offices in São Paulo, Brazil, and Mexico City, and to expand its team in those locations, as well as in its home country of Argentina. The company currently employs approximately 15 individuals, including 11 engineers, and will continue to develop its platform.