recargapay closes a $70 million series c
RecargaPay Secures $70 Million in Series C Funding
RecargaPay, a fintech company headquartered in Brazil, has announced the successful completion of its $70 million Series C funding round. The company specializes in enabling users to easily replenish credit for their prepaid mobile phones through an online platform. Founded in 2010 by serial entrepreneur Rodrigo Teijeiro, who serves as co-founder and CEO, RecargaPay currently focuses exclusively on the Brazilian market.
The Brazilian Prepaid Market
Unlike the prevalent postpaid mobile plans in the United States, Brazil – where the current minimum wage is approximately 1,100 reals per month (around $202 USD) – sees a significant portion of the population utilizing prepaid mobile services. This necessitates frequent purchases of calling cards from local retailers to maintain phone credit, allowing users to circumvent monthly recurring bills.
According to Teijeiro, the preference for prepaid plans stems from a lack of trust in traditional telecommunication companies. Concerns regarding roaming charges and overage fees were major drivers. The inconvenience of unexpected, high phone bills after international travel is a relatable experience, but imagine such costs occurring on a monthly basis.
Evolution of the Platform
In 2014, Teijeiro and his co-founders, including his brother Alvaro, the company’s CTO, transitioned the RecargaPay website into a dedicated mobile application.
Teijeiro explained that prior to RecargaPay, replenishing phone credit at 10 p.m. required a trip to a local store. This was particularly inconvenient given the historical difficulty in obtaining landlines in Brazil, a process that often took months to complete. Mobile phones gained rapid adoption due to this challenge.
Strategic Market Focus
Initially, RecargaPay operated across several Latin American nations – including Argentina, Chile, Colombia, Mexico, Peru, and Brazil – as well as in Spain and the United States. However, in 2016, the company strategically decided to concentrate its efforts on the Brazilian market. This decision was based on Brazil being the largest market in Latin America and possessing the highest credit card penetration rate.
Teijeiro emphasized that a common error made by investors in Latin America is treating the region as a monolithic market. He noted that differing regulations, particularly within the fintech sector, make broad-scale expansion challenging.
Revenue Model and Financial Performance
The company generates revenue by implementing a monthly fee of 19.99 reals. Customers who top up their phones online through the app receive 4% cash back, funded by payments from the mobile carriers to RecargaPay, which are then passed on to the user.
RecargaPay is currently EBITDA positive, and has secured over $100 million in funding to date. The newly acquired $70 million will be allocated to “expanding its financial services offerings to small businesses and consumers, including further development of its popular subscription program Prime+,” as stated by the company.
Expanding Service Offerings
Beyond mobile top-ups, RecargaPay now provides a range of services. These include the purchase of gift cards, access to microloans, replenishment of public transportation cards, and bill payment facilities. Teijeiro clarified that RecargaPay and Nubank, a leading digital bank in Latin America, are not direct competitors but rather coexist within the same financial ecosystem. Nubank customers with credit cards can utilize RecargaPay for mobile top-ups.
Market Trends and WhatsApp's Impact
A 2020 report from TechnoBlog, a Brazilian news source, indicated that approximately 83% of mobile phones in Brazil were prepaid in 2010. While this figure has decreased, prepaid services still account for a substantial 49% of the market. This shift began in 2012 with the introduction of smartphones and the increasing popularity of WhatsApp.
Previously, Brazilians faced high fees when calling users on different mobile networks. This led to individuals purchasing multiple SIM cards from various carriers and managing them separately. Remembering which contacts used which carrier was a significant challenge. The launch of WhatsApp effectively eliminated this issue, contributing to its widespread adoption in Brazil.
Investment Details
The Series C funding round was jointly led by Fuel Venture Capital, based in Miami, and IDC Ventures, located in Madrid. Additional investors included LUN Partners, Experian Ventures, and ATW Partners.
Maggie Vo, Managing General Partner and Chief Investment Officer at Fuel Venture Capital, stated, “RecargaPay is a pioneer in the payments sector as one of the first all-in-one platforms to serve such a wide array of everyday needs of Brazilians.” She further expressed excitement about supporting a company that empowers individuals by providing greater control over their finances and challenging conventional banking systems.
Teijeiro added that RecargaPay caters to both the banked and unbanked populations. The company’s long-term vision is to establish a comprehensive mobile money ecosystem, achieved through a phased approach of problem-solving, resulting in a vertically integrated payment platform offering diverse financial services.