Madrid-Based Lana Launches in Latin America to be the One-Stop Shop for Gig Workers’ Financial Needs
Madrid-based startup Lana is looking to be the next big thing in the Latin American fintech space. Founded by serial entrepreneur Pablo Muñiz-whose last business, Denizen, was backed by BBVA- Lana is looking to be “the all-in-one financial services provider for Latin America’s gig economy workers” (TechCrunch).
Muñiz’s last company, Denizen, was designed to provide expats in foreign and domestic markets with the necessary financial services to begin their new lives in a foreign country. Although the target clientele for Lana differs from Denzien’s middle to upper-middle-class international traveler target demographic, the challenges gig economy workers face in Latin America are strikingly similar.
As reported by TechCrunch, the biggest niche that Muñiz saw that was underserved was actually in the gig economy space in Latin America.
“I knew several people who worked at gig economy companies and I knew that their businesses were booming and the industry was growing. [But] I was concerned about the inequalities,” he said.
Workers in gig economy marketplaces in the region often don’t use traditional bank accounts, and are paid through the apps on which they list their services in “siloed wallets”, which are exclusive to that particular app. Lana is hoping to become “the wallet of wallets” for all the numerous companies on which laborers list their services. Often times, drivers will work for Uber or Cabify and also deliver food for Rappi, and the workers have distinct wallets for each service.
Lana hopes to unify these wallets into a single account, which would operate like a debit account.
According to TechCrunch, these accounts can be opened at local merchant shops and (once opened), workers will have immediate access to a debit card which they can use at other locations. The Lana service also plans to roll out a bill pay feature to users, in the first evolution of the product into a marketplace for financial services that would appeal to gig workers, Muñiz said.
“We want to become that account in which they receive funds,” he said. “We are still iterating the value proposition to gig economy companies.”
Working with companies like Cabify, the Spanish startup plans to roll out in Mexico, Chile, Peru and, eventually, Colombia and Argentina. Eventually, Lana hopes to move beyond basic banking services and into credit services. Hundreds of customers are already using the service through the distribution partnership with Cabify, which ran the initial pilot to determine the viability of the company’s offering.
“The idea of creating Lana was initially tested as an internal project at Cabify,” Muñiz wrote in an email. “Soon Cabify and some potential investors [will see] that Lana could have a greater impact as an independent company, being able to serve gig economy workers from any industry and decided to start over a new entrepreneurial project.”
Through these connections with Cabify, Lana was able to bring in other investors like the Silicon Valley-based investment firm Base 10.
“One of the things we’ve been interested in is in inclusion generally and in fintech specifically,” said Adeyemi Ajao, the firm’s co-founder. “We had gotten very close to investing in a couple of fintech companies in Latin America and that is because the opportunity is huge. There are several million people going from unbanked to banked in the region.”
Along with other investors, Base 10 invested $12.5 million to finance Lana’s expansion. Nubank, Latin America’s biggest fintech company, is offering credit services across the continent, but most of their end users already have an established financial history.
“Most of their end users are not unbanked,” said Ajao. “With Lana it is truly gig workers… They can start by being a wallet of wallets and then give customers products that help them finance their cars or their scooters.”
The ultimate idea is to get workers paid faster and provide a window into their financial history that can give them more opportunities at other gig economy companies, said Ajao.
“The vision would be that someone can plug in their financial information for services. If they’re working for Rappi and have never been an Uber driver and they want to be an Uber driver, Lana can use their financial history with Rappi to offer a loan on a car,” he said (TechCrunch).
U.S. and Colombia to Bring $5B in Investment to Rural Areas
The United States and Colombia will work together to bring new investment to rural areas of Colombia, officials said on Monday. According to Reuters, Colombia’s president has reiterated support for the U.S. candidate to lead the Inter-American Development Bank.
The investment initiative will pool up to $5 billion in private funds for rural areas over three years, U.S. National Security Advisor Robert O’Brien told local newspaper El Tiempo in an interview.
“This initiative will focus on key elements of the 21st-century growth in Colombia, the rule of law, security, infrastructure, rural development and democracy,” O’Brien said in a joint video statement with Ivan Duque.
Reuters reports that Colombia will be part of a pilot program intended to incentivize near-shoring of U.S. businesses, which is just one part of a larger U.S. strategy announced on Monday.
Mauricio Claver-Carone, special adviser to President Donald Trump for the Western Hemisphere, was also on the visit. President Duque repeated Colombia’s support for Claver-Carone in his bid to lead the Inter-American Development Bank (IDB), which is set to choose a new head next month.
However, several other Latin American countries have called for a vote delay, citing concerns over having an IDB leader from outside the region.
“I want to reaffirm the support Colombia has given to the candidacy of Mauricio Claver,” Duque said. “You have presented a clear agenda to invigorate the recovery of Latin American economies.”
The United States unveiled a Western Hemisphere strategy on Monday- focused on security, economic growth and countering China’s influence in the region- and aims to encourage American companies to move manufacturing facilities and supply chains out of China and back to the Americas, a U.S. National Security Council official said.
Reuters reports that the strategy also vows to maintain maximum pressure on rulers in Venezuela, Cuba and Nicaragua.
Colombia’s Economy Crashed 15.7% Last Quarter Amid Retail Slump
Colombia’s economy suffered its deepest crash on record as the pandemic bankrupted thousands of businesses, including the national airline, Avianca.
As reported by Bloomberg, GDP slumped 15.7% in the second quarter from a year earlier, led by a drop in household spending. That compares to the median forecast of a 15.4% fall in a Bloomberg survey of analysts.
Lockdown measures to prevent the spread of COVID-19 have been in place since March. While the number of infections continues accelerating, Colombia is faced with the prospect of continued hardships.
“Unemployment has soared to 20%, far exceeding that of other major economies in the region. The retail, transport and hospitality sectors contracted 34.3% from a year earlier, while construction shrank 31.7%. Only the financial, agriculture, and real estate services sectors escaped the crash, and registered slight growth. GDP fell 14.9% from the previous quarter. In the second quarter, Colombia suffered relatively few infections compared to its neighbors, but the virus has rapidly spread in recent weeks. The seven-day-rolling average of deaths per million people is currently among the world’s worst according to the European Centre for Disease Prevention and Control, showing that the disease is peaking later than it did in many other places” (Bloomberg).
The Finance Ministry predicts the deepest contraction in more than a century this year, which it forecasts will swell the budget deficit to more than 8% of GDP.
Additionally, the central bank has cut interest rates by 2 percentage points since March, down to a record low of 2.25%. Bank governor Juan Jose Echavarria claims he’s skeptical about the impact of interest rates cuts on businesses that are closed, but insists this will pave the way for a faster recovery once the economy re-opens.
Pandemic Proves Beneficial for Mercado Libre’s Business Model as Profits Soar
As the coronavirus pandemic accelerates the worldwide e-commerce boom, Argentine giant Mercado Libre has seen profits soar.
The company, founded in 1999 by Marcos Galperín, has doubled its sales (in volume and invoicing alike) during the second quarter this year, as the pandemic swept through the region and most countries decreed quarantines and lockdowns. According to Buenos Aires Times, the company’s stock exchange valuation now stands at around US $55 billion, placing it alongside Brazil’s Vale, the leading Latin American company.
Buenos Aires Times reports that Mercado Libre’s Wall Street shares, which started the year at US $610.19, were priced at an impressive US $1,111.64 last week, in response to investor demand for e-commerce.
Employing a similar business model to platforms like Amazon and eBay, Mercado Libre operates in 18 countries, and ranks seventh among fellow global e-commerce giants.
“In Latin America there are many opportunities. Digital transformation is estimated to have accelerated between three and five times in recent months,” Sean Summers, the company’s Marketing Vice-President, told AFP.
Despite Latin American economies’ battle with poverty and rising unemployment, Mercado Libre has seen the number of users climb by 45.2%, reaching 51.5 million users, according to the latest balance sheet. The company’s net income increased from US $545 million in the second quarter of 2019 to US $878 million in the last quarter, as gross profits rose from US $272 million to US $427 million in the same period. The net profit after paying tax was US $55.9 million in the last quarter or US $1.11 per share (Buenos Aires Times).
“In our marketplace there were 16 purchases and 425 visits per second and the total volume of payments processed during the quarter by [electronic payment platform] Mercado Pago (…) was US $11.2143 billion, a year-on-year increase of 72.1 percent,” Summers stated.
The global pandemic has boosted sales and virtual payments: the key pillars of the Mercado Libre’s business model. The company’s comprehensive credit system- available in several countries- has also been highly beneficial for company earnings.
“For the state, producers and consumers there is no other option than to click on or succumb…Before COVID-19 a third of all payments in developing economies were channelled physically – mail, cheques or cash.” Ignacio Carballo, the director of the Ecosistema de Programas Fintech at the Catholic University of Argentina (UCA) said.
But during the pandemic, “companies adapted and invested in their digital sales channels. It remains to be seen how much will remain of this forced digital inclusion of the consumer and if the changes of habit will be permanent,” Carballo added.
In Argentina alone, online sales have grown 84% since March, according to the Chamber of E-Commerce.
By the end of the second quarter, Mercado Libre had added 17 million new users with a daily 3.3 million transactions via Mercado Pago, granting US $172 million in loans in Mexico, Brazil and Argentina (Buenos Aires Times).
In Latin America, “over half the population is outside the traditional financial system, or underbanked. Including that portion of society within financial services is an enormous revolution which still remains to be consolidated,” said Summers.
With a payroll of 12,200 employees throughout the region, Mercado Libre announced that it will be hiring 5,000 more employees this year, mostly in its distribution centers.
“Perhaps this is the definitive triumph of the data economy: less retail and more online catalogue, less supermarket trolleys and more delivery, less operations in branches and more online banking,” concludes Javier Minsky, CEO of Virtualmind consultants.
Panama Canal Shipping Rebounds in Hopeful Sign for Global Trade
The Panama Canal is seeing signs of a rebound in global trade, as ship transits recover from the diminished levels caused by the COVID-19 pandemic.
As reported by Bloomberg, total transits through the waterway rose to 933 in July; up from 845 in June (which was the fewest since the canal opened an expanded set of locks four years ago to accommodate bigger ships). Initial August numbers show further improvement, Canal Authority Deputy Administrator Ilya Espino de Marotta said in a phone interview.
Container shipping between the United States and Asia- the canal’s most important route- began to rise this month, she said. However, cruise ships continue to cancel their slots and the Liquid Natural Gas trade may require more time to recover, she added.
“If you go by segment, we think containers might recover strongly, cruise liners not at all,” Espino de Marotta said.
Colombia's Banco Occidente to Issue $92.5M in Bonds to Support Loan Business
Colombia’s Banco de Occidente issued ordinary bonds worth 350 billion pesos ($92.5 million) on Thursday to help finance its loan business, one of its underwriters said this week.
According to NASDAQ, the bonds will have placements of three, six and 12 years with AAA ratings, said brokerage Casa de Bolsa which - alongside Banco de Occidente BOC.CN - forms part of Grupo Aval GAA.CN.‘
Grupo Aval, the country’s largest financial conglomerate, is owned by Colombian billionaire Luis Carlos Sarmiento. The proceeds will be used to increase available resources for loans, which form part of Banco de Occidente’s corporate objectives, the brokerage said in a note to clients.