Pagpop Mobile Payments, empowering small entrepreneurs

The company: Pagpop Mobile Payments

The inclusive business initiative: providing access to credit card payments for micro and small entrepreneurs in Brazil through a mobile platform.  

Social impact: reached almost 100,000 entrepreneurs 

Commercial stage: looking for Series B investment

Having experienced firsthand the difficulties that small entrepreneurs face while running a business in Brazil, dentist turned social entrepreneur Marcio Campos set up Pagpop to improve access to mobile credit payment arrangements for micro and small entrepreneurs. Marcio believes 20 million Brazilians could benefit from his service.

How did your inclusive business come into being? 

As a dentist with my own practice in Sao Paolo, I encountered a number of problems with customers who were paying with bad cheques or cash instalments that they wouldn’t honour once the treatment was completed. I, like most other entrepreneurs in the area, didn’t have a credit card machine and so could only accept cash and cheques. I realised that in order to pay for expensive dental treatments, I had to provide customers with a way to pay me in instalments by credit card that they would have to honour. But the other problem for small entrepreneurs like me was that the existing way of accepting credit card payments was very difficult for a number of reasons including the expense of renting a card payment machine, not having a bank account and the bureaucratic process of banks.

I realised that a more entrepreneur-friendly system had to be developed. In 2006, I set up a low-cost technology platform that could allow MSMEs to accept credit card payments through their smart phones, tablets or computers, eliminating the need for the traditional payment machine.

How does your business work in practice?

The Pagpop platform allows business owners to receive credit card payments from their customers just by accessing a webpage. All they need is a very basic smart phone or computer to do this. The business owners then pay us a small monthly fee for this service and we also receive a spread on each transaction conducted.

We also cover the anticipation of receivables when clients sell their products on instalment and receive an additional spread on this. This is so much more affordable for small business owners than using the traditional credit card payment device which typically costs $50 a month. They are also charged a much higher percentage per transaction.

We have ensured that those entrepreneurs who don’t have banks can also accept payments on credit by allowing them to link their Pagpop accounts to a friend’s or family member’s bank account. Many of our clients are illiterate so we provide training to show people how to use the internet and apps in order to use the service.

Have partnerships been useful for your business?

Partnerships have been vital for distribution. Collaborating with other businesses in Brazil have been key to getting clients on board. We have tie-ups with companies like Mary Kay (cosmetics firm that sells products through women entrepreneurs) and Safer Taxi (fleet of self employed taxi drivers) that has given us access to thousands of entrepreneurs in need of our service.

We also have a partnership with Mastercard to launch a pre-paid card that will allow people without bank accounts to use card payments. This will help us reach a new segment of beneficiary.

Apart from partnerships, what other factors have contributed to your success?

We have made sure we get to know who our customers are and what they are selling and we believe that is why we have been successful. We have done a lot of market research.

Additionally, the market has been favourable. There has been a huge growth in mobile sales in recent years. Now, almost everyone has a smart phone. They may not have a bank account but they will definitely be connected to the internet somehow.

What challenges have you faced in raising finance?

Our Series A investments covered our growth till now but to reach scale we need a fresh injection of funds and are currently fundraising for Series B. My focus for this year is getting that investment. It is the only way to keep up with growth and make sure we can compete with others coming into the market like Santander which is much bigger.

In Series B, we are also looking to target investors and partners that are linked to micro-credit services so that we can provide additional micro-credit services to our MSME clients.

What commercial success have you seen so far?

We have grown rapidly recently. We’ve gone from having 64,000 clients in December 2013 to close to 100,000 in July 2014. We have revised our end of 2014 target from 104,000 to 130,000. As a result, we expect revenue of $2million in 2014.

We are very close to break-even point. We expect to get there in 6 months.

What social impact are you having?

Our clients are mostly small business owners, a high proportion of whom are women. We have 98,300 clients so far. We are aware that some of these aren’t low-income but currently don’t have a system in place to measure this. We are keen on changing this and hope to put in place a more accurate impact measurement system in the future.

What key lessons have you learnt in your inclusive business journey so far?

We are not like a big company that just cares about profit, it’s important for us to know we are making a difference to people and we believe making an effort to find out who their customers are and what they are selling has been critical.

Partnerships have been very important for us but we know, at the end of the day, we need investments to keep going. Fundraising is not easy and Series B is critical for us to keep growing at this pace.

What are your plans for Pagpop going forward?

We are targeting 500,000 clients by 2017, conducting $300m in transactions.

In this series, we speak to some of the ‘Breakthrough SMEs’ identified in the Business Call to Action’s (BCtA) Flagship report Breaking Through: Inclusive Business and the Business Call to Action Today. These are all small and medium enterprises that are emerging as influential actors in inclusive business. These interviews will uncover the stories of these SMEs – what sets them apart from other businesses, how are they overcoming the many challenges at the BoP and what factors are driving their success?