Brazil retailer Via Varejo launches digital bank targeting low-income clients

SAO PAULO (Reuters) - Brazilian electronics and appliance retailer Via Varejo launched a digital bank targeting low-income clients in partnership with Boston-based startup Airfox, according to a filing on Wednesday.

The move will take Via Varejo beyond its current role in Brazil as a brick-and-mortar and online seller of goods, challenging its competitors in Latin America’s largest economy, where App-based wallets are an increasing trend among fintechs and traditional banks.

The company teamed-up with Airfox in September last year, when it first announced plans to develop digital payments solutions, in a deal that gives Via Varejo the option to acquire up to 80 percent of the U.S. startup in the next three years.

Unlike other App-based platforms, the so-called BanQi will also have physical presence by using the almost 800 Casas Bahia stores as branches for cash withdrawals, deposits, pre-paid cell phone recharge, bill payments and other transactions free of charge.

“It is an easily accessible and scalable platform,” Chief Executive Officer, Peter Estermann, told journalists on Wednesday.

Besides Via Varejo’s customer base of 60 million people, BanQi also aims to lure outside clients that are unattended by traditional banks whether because of their credit score or their informality job status, Chief Financial Officer Felipe Negrao added.

“We expect the number of BanQi users to grow very rapidly and easily surpass some local competitors,” he said, citing as examples Brazilian fintech Nubank and digital lender Banco Inter SA.

Both executives refused to provide the total amount invested by Via Varejo and Airfox in the launch of the platform, but said the initial disbursement involves mostly costs to add new clients. “The operation should hit at least a breakeven from the third year onwards,” Negrao said.

Initially, the App-based BanQi will only be available in Android smartphones, but an Apple version is likely to be available by year-end.

New features will also be added to the platform by January 2020, including savings account, insurance products and cashback program for both pre-paid and credit cards, the executives added.

“We also want to extend loans, but for that we will need to apply for a Central Bank authorization”, the CFO said.

A subsidiary of Brazil’s supermarket chain Grupo Pao de Acucar, itself controlled by France’s Casino Guichard Perrachon SA, Via Varejo has been on the block since November 2016, but ongoing negotiations should not interfere in BanQi’s operations, according to Negrao.

Reporting by Gabriela Mello; editing by Diane Craft and Alistair Bell