Sometimes a corporate strategy can be summed up in just a few words.
In Inter & Co.’s case, its strategy for crafting the super app — branching beyond its roots in credit access and expanding beyond Brazil’s borders — boils down to staying away from the comfort zone.
João Vitor Menin, CEO of Inter & Co., told PYMNTS’ Karen Webster, “We’re building something here — and we’re building something big.”
Building something big, and gaining scale, requires looking beyond the confines of quarterly earnings reports and share price gyrations. All too often, in Menin’s telling of it, short-term concerns can dominate a publicly-listed firm’s thinking.
He remarked to Webster that oftentimes, investors fail to ask the most pertinent questions of Inter’s management, such as where the company sees itself in five years.
The long-term strategy is the correct strategy.
Inter, of course, has been expanding a platform that embraces and offers everything from banking and investing to peer-to-peer (P2P) payments. It’s a replicable model that has potential across the globe.
Learn more: Brazilian Super App Inter Sees Nasdaq Listing as Springboard to US Consumers
As detailed in this space in a previous conversation between Menin and Webster, the super app should be an agnostic platform that offers something for everyone, young and old, regardless of income or age. As for the growth, Inter’s second quarter results showed that clients grew by 73% year over year to 20.7 million. Revenues surged by 130%, and monthly average revenues per customer were up 16%.
Investors were cheered by the quarterly showing, where growth was accompanied by an expansion of net interest margins, sending the share price up by more than 30% on the Nasdaq in the 10 days since the Aug. 15th announcement.
While Menin was, and is, sanguine about the results and cheered by the stock price movement, he stated that if Inter focused solely on those (short-term) activities, the company would be staying within the aforementioned comfort zone.
In fact, Inter would not be taking the leap into the U.S. in the face of inflation that is only on the rise, where margin impacts can be volatile and where fickle investors in the public markets might be skittish about how that all might impact earnings over the next quarter or two.
But, looking out over the long term and looking at the greenfield opportunities, he said, “I believe that we’re going to be able to replicate what we’ve done in Brazil. We need to build for the mid and the long term.”
Menin said the long term offers a number of levers for profitability, particularly with an installed base of clients that use the company’s service more frequently over time and embrace new services along the way.
About 58% of clients have been with the firm more than a year, and the cost to Inter of serving those individuals increases only marginally over time. The pandemic has given tailwind to that installed base, where Inter had roughly 4 million clients in 2019, and today’s levels have quintupled that amount.
See also: Brazil Super App Inter Acquires FinTech Usend
The build-out of the platform anticipates tens of millions of clients over the next few years across various geographies.
In getting there, and in looking to the U.S., he noted a different approach than had been seen in Brazil, where the company started with a credit portfolio that in turn led to fashioning a digital retail banking franchise. The money is there to fund growth, as is a diversification of revenue streams, as Inter right now gets half of its top line from the “spread” on lending products, while the other half comes from fee income.
“Unlike the other banks in Brazil, we have everything in one single app, one that is convenient, and that has a good value proposition,” said Menin, “and a good UX.”
Looking Toward the US
Flip the model a bit, and that’s the go-to-market strategy for Inter here in the States. The starting point is the bank, via deposits and money mobility, and bill payments, while credit will come later as Inter begins to lend off of a strong balance sheet and recurring maintenance revenues.
Immigrant populations, he noted, tend to use these services often and prove to be loyal customers on the platform.
Over time, the deposit account can help the underserved migrant populations build credit histories (and help position Inter strategically against neobanks and FinTechs in the space). There’s also growth to be realized in another channel via the Usend acquisition, which allows individual and commercial users to make digital transfers in U.S. dollars as they transact and do business in the U.S.
“We want to be the bridge for all Brazilians who want to do business in the U.S.,” he said.
A bit closer to home, in Brazil, Inter has 7.7% market share with Pix, the instant (and free) payments system. Menin said that the company is on track to launch Pix Credit, and the new infrastructure and efficient rails will be on track to replace traditional credit cards in the country.
Inter’s platform and data analytics can enable nearly-real-time underwriting, with visibility into bank accounts and spending — which can help extend credit to those who might otherwise not have access.
“Fast forward three, four, five years,” he told Webster, “and you’ll see we’ve built something unique.”
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