Brazil’s Inter is aiming for growth in the U.S. by adding a suite of financial products for underserved U.S. immigrants.
Inter also plans to list on Nasdaq on Thursday, coinciding with the launch of its U.S. operation, under the group name of Inter & Co. The company wants to replicate the success of its Brazilian subsidiary Banco Inter, which sells a wide range of products through a super app.
In January 2022, Inter acquired Los Angeles-based Usend, which provides global accounts and remittances to Latin America. Usend, which has 150,000 customers and handled remittance volumes of $200 million in the first quarter of 2022, will form the basis of Inter’s U.S. operation and will change its name to Inter.
In Brazil, Banco Inter, which launched in 2015, now has 20 million customers. The digital-only bank’s super app offers checking and savings accounts, loans, credit cards, insurance products, investments and cross-border payments, as well as access to Intershop, an e-commerce marketplace providing non-financial products.
Owning a bank is a key differentiator from fintech wallet providers and lenders, as it provides Inter with access to demand and timed deposits, said João Vitor Menin, Inter’s CEO and son of the bank’s founder.
“Inter is moving to Nasdaq as it’s a global exchange, which will raise our profile and allow us to make further acquisitions that could be funded through the capital markets,” Menin said. “We’re a tech company that is going global and want to have access to U.S. and global investors, which is important to us in the mid- to long-term.”
Inter held its Brazilian IPO in 2018 on São Paulo’s B3 (Brasil, Bolsa, Balcão) stock exchange, and had three follow-on stock offerings between 2019 and 2021.
“As of March 21, 2022, we had BRL 8.5 billion ($1.65 billion) in shareholders’ equity, so we don’t need to raise any new funds for our business,” said Menin. On March 31, 2022, 68% of Inter’s stocks were in public hands, with the Menin family holding the remainder.
Currently, Usend primarily serves Brazilian expatriates who want to send funds from the U.S. to Brazil, but it also has customers from other U.S. immigrant communities. It offers U.S. dollar-based global accounts whose routing and bank account numbers are provided by New York-based Community Federal Savings Bank, with funds primarily being held at Wells Fargo. As Usend holds a money services business license, the funds aren’t covered by FDIC insurance. The global accounts come with debit cards that can be used for e-commerce purchases, and offer remittances and international bill payments.
Majority, a startup with a mobile app that combines a bank account with other benefits such as global remittances and international calling, began by serving the Cuban and Nigerian communities in Florida and Texas. Now it’s available in all states and will use $19 million in seed funding to accelerate its growth.
Usend customers can send money via ACH, wire transfer and SWIFT from their global accounts, with Zelle planned to be added in 2023. Inter also plans to turn its global accounts into multicurrency accounts with debit cards that can be used for local-currency purchases next year.
Inter wants to launch a U.S. super app, offering a wide range of financial products, starting with day-to-day bank accounts, investments through a partnership with Dallas, Texas-based Apex Clearing, gift card purchases and remittances.
A credit card is planned by the end of 2022 followed by auto loans and mortgages in the second half of 2023 or 2024, Menin said.
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Inter’s super app strategy has paid off in Brazil.
In the first quarter of 2022 to 31 March, Banco Inter’s demand deposits grew 37% year-on-year to BRL 9.6 billion ($1.87 billion) and its loan portfolio rose by 81% year-on-year to BRL 19.8 billion ($3.85 billion). In addition, the bank, whose assets totaled BRL 38.5 billion ($7.49 billion) as at March 31, 2022, had 2 million active investor clients.
Backed by Japan’s Softbank, Inter is following in the footsteps of Brazilian digital bank
Inter is delisting from Brazil’s B3 exchange and migrating its stocks to Nasdaq, although it will also start trading in Brazil through Brazilian depositary receipts (BDRs).
For its U.S. business, Inter will use the technology stack which it built for its Brazilian digital banking operation. “We’ll export our technology to the U.S., as it was cheaper to develop our super app in Brazil than in the U.S.,” Menin said.
Inter’s Brazilian bank operates 100% in the cloud using Amazon Web Services and is based on application programming interfaces and microservices, an approach to software development that uses API-based modular components for faster deployment and expansion.
“As our technology stack is API-based, we’re able to more easily integrate with partners such as fintechs,” said Menin. “In the U.S., we want to partner with other players.”
Inter will compete with other fintechs that provide digital banking services to U.S. immigrants. Companies such as Miami-based Fortú; Austin, Texas-based Tend; San Carlos, California-based Oportun and Los Angeles-based Welcome Tech use apps to reach
Hispanic consumers are heavy users of digital banking channels, according to Francisco Javier Alvarez-Evangelista, an advisor for U.S.-based Aite-Novarica’s retail banking and payments practice.
Fifty-four percent of U.S. adults who identify as Hispanic, Latino or Spanish use desktop PCs or laptops to access their financial accounts at least once a week, and 69% use smartphones to do so, according to Aite-Novarica data.
While Inter will benefit from brand recognition from Brazilians living in the U.S., its main advantage over other digital challengers will be its broad range of services, Alvarez-Evangelista said.
“U.S. digital challengers are primarily focused on deposits or loans, and haven’t been good at providing diversified financial services that add value to banking relationships such as insurance, investments or remittances,” he said. “Inter’s differentiator will be to act as a full-service provider.”
