Co-authored by Hanel Baveja
While we are not the first to point this out, access to capital in Latin America remains a massive challenge. Financial infrastructure and tools are concentrated on the top earners, excluding the majority of the population from banking services and credit.
In Colombia, only 26% of the population have credit cards and even more strikingly only 38% of adults over the age of 15 have a bank account. Similarly, e-commerce comprised just 11% of overall retail sales in Brazil in June 2020. This state of affairs has created immense pent-up demand from a rapidly growing middle class that has been locked out of the Latin American financial system by traditional, analog institutions.
The good news is accelerating smartphone adoption means 70% of Latin Americans have a potential bank in their pocket. The idea that the distribution layer of financial services of the future will be smartphones, not banks, is one we have thought about since before we invested in Payjoy in 2016. A central theme of our thesis 3.0 is backing trusted brands that broaden access to capital.
Today we’re announcing a Series B investment in ADDI, a company based in Bogotá, Colombia that is enabling digital commerce in Latin America. Starting with its Buy Now Pay Later products, ADDI today helps the 260 million people in Colombia and Brazil buy goods online more easily. One product allows customers to pay in up to three monthly installments at no cost to themselves, another product provides 6-24 month installment financing for larger purchases.
ADDI’s credit scoring algorithms give their customers real-time financing options when they shop online or through WhatsApp (which has 120 million users in Brazil alone) with a merchant partner. Some of the most popular product categories that ADDI finances include electronics, apparel and furniture.
ADDI is not only broadening consumer access to point of sale credit, but also enabling the longtail of Latin American merchants to grow their ecommerce businesses by offering their customers convenient payment options that free up capital and boost sales. ADDI’s merchants frequently double their AOVs and also see meaningful increases in conversion.
We’re especially excited to partner with ADDI’s co-founders Santiago and Daniel, each with deep experience across financial services, capital markets and Latin American infrastructure in a business where execution and responsiveness are critical. We look forward to joining the ADDI team members in their journey along with existing investors Andreessen Horowitz, Foundation Capital, Monashees, Quona Capital, 8VC and Citius Capital.