In this article, Marcelo Bentivoglio introduces his company QI Tech and how they provide their clients with “buy now pay later” API integration modules.
- Q: What would you say Marcelo is the number one insight you had from that time that still influences you today?
- Q: Can you summarize what QI Tech is and how much you have raised?
- Q: So in the time you’ve been there and been building that foundation, what is it that QI Tech does?
- Q: How does that process of using QI Tech work?
- Q: How are people utilizing QI Tech APIs to create different types of value for financial services?
- Q: How does it work with somebody with no banking history? How can QI Tech facilitate that person too?
- Q: What is QI Tech doing to make that buy now pay later work for that person in the background and work for me as an e-commerce company?
- Q: Once the “buy now pay later” loan is issued, are payments made through QI Tech or by the customer?
- Q: What does the employer need to offer any credit to their employees?
- Q: Is the loan from the employer to the employee, or does the employer need a loan for payroll?
- Q: What would be another example of people using QI Tech banking APIs to enable the employer-employee microlending?
Q: What would you say Marcelo is the number one insight you had from that time that still influences you today?
I believe it was technology because I studied economics and wanted to be a banker and be in the financial industry. I had this stereotype of a banker making a lot of money and growing a career at a big bank. At some point, when I got to Goldman, I was working with a highly skilled team of programmers and tech guys.
It was like in 2010, so back then, technology wasn’t that cool. Fintech wasn’t a term that everybody was talking about, but at some point, I realized that technology was the main thing going forward, and I wanted to be part of that in some way, so I believe the most important insight was technology is going to change the world, and I want to be part of it.
Q: Can you summarize what QI Tech is and how much you have raised?
QI Tech is a bootstrap company. We started with the money from the Co-Founders, and we invested in the company for about two years in kind of a stealth mode. At some point, we decided to raise money in order to grow faster and achieve more of our dream, and we raised 50 million in our Series A.
It was our first round, and we raised 15 million dollars with GIC, so we are actually very happy and very excited about the next steps.
Q: So in the time you’ve been there and been building that foundation, what is it that QI Tech does?
When building your product, you usually go for a global mindset from the beginning. Because you’re building a startup, you’re a new company and want to reach as many people as possible.
Because you want to have your product worldwide, but when you’re talking about fintech. That’s not exactly true for every niche, especially when we are dealing with credit.
Usually, credit is regulated by central banks, and for that fact, it’s not that simple to just be born with a global mindset. You must respect the local rules, and you must adapt your product to the local rules.
So here in Brazil, in 2018, the Brazilian central bank issued two new financial institutions licenses, and they issued them because usually, the market here in brazil is very concentrated.
Only five banks concentrate almost 90 percent of the market, and the central bank wanted to improve the competition and improve the regulation to have more entrepreneurs start their own financial institutions.
So we were the first FCD approved by the central bank. FCD is a new regulation that allows someone to build a financial institution from scratch, and we did that as soon as the central bank issued the new law.
We applied, and we were the first to get the license as QI Tech our main goal was to build a whole bank into code. So we wanted to have everything that you have in a traditional bank. I wanted you to have APIs as well.
So basically, we were trying to facilitate the go-to-market for new products, specifically about credit. If you want to issue credit for student loans, how can you do that in a country like Brazil? You need to have a license, and you need to have a partner in a financial institution.
As QI Tech, I am your partner so I kind of licensed you my license as a service model where you can have your own bank without having all the hurdles to get a bank. To get a bank in Brazil, it takes between 8 to 12 months just to get the license and another six to 12 months to build your product to have your company up and running.
Q: How does that process of using QI Tech work?
We have the infrastructure ready, so you can open bank accounts, you can make money transfers, can issue bank deposits, can create the collection infrastructure for your loans, and pay and manage late payments. So you pretty much can do everything that a bank can, but you can do it using our APIs.
It’s a bunch of microservices where you can build your own experience for your own final customer. The infrastructure of QI Tech is pretty much everything that a bank has translated into a microservice of each one of the small pieces of a bank, so a bank account is one microservice.
If you want to have an escrow account to manage the collection, you can have one escrow account. Money transfers or bank sleeps or issues issuing credit, so everything that a bank has now you can consume as you wish and build your own journey and your own experience.
The final customers don’t even know that QI Tech exists because we are the infrastructure running at the kitchen of the product, and that’s why we kind of started the AWS of banking here in brazil.
Q: How are people utilizing QI Tech APIs to create different types of value for financial services?
Let’s start with e-commerce; it’s a very common topic around the world right now. It’s the buy now pay later method, which means a new payment method during checkout in any e-commerce.
So if you have any kind of online sale, at some point, your customer is going to have some items on the cards, and to check out, they must choose a payment method. At this moment, you have one new option that is called “Buy Now Pay Later.
That’s the term that e-commerce uses, and it allows you to buy without having money or without having a limit on your credit card, or without having anything at all. I mean, you can be unbanked at all and also finish your purchase on e-commerce. So what we built is the whole infrastructure for other companies offering “buy now pay later” on their e-commerce.
Oo, if you have an e-commerce and you want to provide a credit line for your customers, you can just plug and play at QI Tech, and you now have another payment method like a credit card visa master, and now QI Tech “buy now pay later.”
It’s a new payment method, and the curious thing about this product is that we build it for e-commerce, but the companies that are using it the most are other fintech companies that want to create a whole new experience for the final customers and to provide that for e-commerce.
So we have a third party here working with QI Tech and trying to build as many options on the checkout for those e-commerces to convert more, to have more sales, and to kind of acquire any kind of customers even though this customer um can be unbanked and in brazil, that’s a reality.
Q: How does it work with somebody with no banking history? How can QI Tech facilitate that person too?
We are not providing credit here, and we are not providing funding for these operations. We are just providing the infrastructure for someone that has funding and has some kind of relationship with the final customers, and that’s the big goal here.
So if you are someone unbanked but you have an uber account because you can ride uber even though you don’t have any bank account. You can pay cash, and then you can ride uber, and then you don’t need to have a bank account to do so.
The same person can ask for a credit in one of those e-commerce sites and use the information on their uber account to provide some transactional data to the e-commerce.
They can approve or reject your credit line, so, at some point, you can have a credit even though you don’t have any kind of bank account.
Now QI Tech is also able to connect to, for example, the uber history and allow the e-commerce company to use that data to make a decision, or is that something they have to do on their own.
Right now, they have to do it on their own, but we are working not just to have this new economy but also with open banking here in brazil. Open banking is a very hot topic. Usually, you can approach some transactional data or personal data, and this kind of data is going to be available for the whole industry to have a better scoring for everyone, which means, at some point, better prices as well.
Q: What is QI Tech doing to make that buy now pay later work for that person in the background and work for me as an e-commerce company?
It starts with the onboarding and the data from the customers, so the customers must say your name, your id, or your location address and this kind of thing. So we will check the data with the government database, and we will offer you some anti-fraud checks, which you can use to verify documents.
You can have proof of life with a selfie with some kind of experience that you want to ask your customer. So if you’re using an app, you can ask the customer to take a selfie and then take up a photo from your id, but if you’re using a web app, you can try to locate the IP of the machine you’re using with the location of your document registers on the government database.
So we have all these kinds of checks to make sure it’s not a fraud. We have, I believe, around 200 different points of checks to try to detect fraud, and if your customer is approved on the un-fraud system, then you can try to simulate a credit and try to simulate a loan with all the data.
To have all the data, you need to show your customer the options of the payment, so you send me the interest, the amount you want to issue, and the loan. You also send me the structure of the deal, and then I will generate a full installments plan, and I’m gonna give you back true APIs.
Then you can show that to your customer, and if your customers agree with the conditions, then I am going to issue a loan, and I’m going to register this loan with the central bank in Brazil, and that said, it’s a proper loan. You have a document; you have a digital document that you can sell, and you can trade.
So if you have investors and you have investment funds, you can also originate the loan and then sell to a fund or sell to another bank or sell to another partner in the financial system. So that’s a kind of a resume of the whole experience.
Q: Once the “buy now pay later” loan is issued, are payments made through QI Tech or by the customer?
As I said, you can set up your collection infrastructure at QI Tech as well. To do so, you must have a bank account with us, so you open a bank account, and then you can use your own bank slips and set up all the collection journeys for your customers.
You can set up the dates, and you can set up the time how you’re going to send the message to your customer; through email, SMS, or WhatsApp.
You have all these different types of communication with the final customers. When you send that information to the customer, and the customer makes a payment, you’re going to identify that payment on the bank account that you open here with us at QI Tech.
This is one option so the e-commerce company can quickly open a bank account with the qi tech API, and then that bank account allows the e-commerce company to do something like they buy now, pay later.
Then when the customer’s coming, and you’re going to make all the fraud identification, you could also do some other things such as the credit as open banking becomes available. Then because the e-commerce has a bank account, the customer can make payments through the same API or different APIs at QI Tech.
QI Tech will essentially enable that e-commerce company to know they’re getting their payments on time. They’re getting paid and then for collections, which QI Tech also enables if there’s a collections concern.
Not at this moment, but something we would like to work on because, at some point, you just have a business. If you can collect the money back, and we know that it’s fundamental to our partners today that they have this kind of infrastructure as well, this is something we have on our roadmap.
Q: What does the employer need to offer any credit to their employees?
When talking about economies like Brazil, you usually need to take care of the cost of a loan because it can be very expensive. So, for employers, it is a way to help their employees get a cheaper, low-end, faster, and simpler lowering structure.
Q: Is the loan from the employer to the employee, or does the employer need a loan for payroll?
Now usually, the employer is giving a loan to the employee. At some point, the employer can also have some kind of loan to pay the payroll, but it’s not the typical case.
Q: What would be another example of people using QI Tech banking APIs to enable the employer-employee microlending?
If you want to get an auto loan (example), it’s pretty common in the market. So why are you going to finance the car with your employer besides the fact that you can just finance your car with any car dealer in the market?
Because of the payment or the collection, it is kind of guaranteed because you work there. The company knows how much money you make and knows that you are a good employee. So the risk associated with this kind of loan is way lower than the average in the market.
So if you just go to a car dealer, the dealer doesn’t know you. So the dealer is going to give you a loan with that in mind and usually is going to be more expensive when compared to the loan your employer can guarantee you. So this is the perfect example.
When we analyze the history of a credit card, for example, you go to the restaurant, have a nice dinner, and then want to pay your bill, but you don’t have money. You left your wallet at your place, so you have nothing. How are you going to pay for your dinner?
You must have some kind of credit; you must know the restaurant owner and ask him for credit for one day to get back to your place and get your wallet back and pay the restaurant. Right?
This very basic concept is directly related to the asymmetry of information. If you were the restaurant owner and you didn’t know your customer, you’re not going to give the credit line to him. You are going to ask for a watch or something in collateral.
Like you would say, give me your jacket. I am going to hold your jacket until you get your wallet, and then, after you pay your bill, I will return your jacket or watch. This just happens because the asymmetry of information exists on the road.
Our main goal at QI Tech is to provide as much competition in the market to the point that you are going to be priced what you deserve. That means you are not paying for someone with a lousy history just because the dealer doesn’t know you and doesn’t know the other guy. So the dealer must have a price to cover this asymmetry of information.