Business

After Mexico, PayPal wants to enter Brazil's credit market

With iZettle acquisition, PayPal will also begin the battle against giants of card machines sector

Exterior view of PayPal headquarters in Silicon Valley.
  • Paypal has confirmed that it will enter the credit market and the ‘card machine war’ in Brazil.
  • With iZettle acquisition, PayPal will begin the battle against giants of car machines sector.
  • PayPal is also interested in investing in companies in the country.

PayPal has confirmed that it will enter the credit market and the ‘card machine war’ in Brazil. “We are getting ready to launch Working Capital in a short time with a local partner and we have high expectations of it,” Paula Paschoal, CEO of PayPal Brazil, told to the Brazilian business news site NeoFeed.

“PayPal used to be a payment button on a website, but we have become a service platform for retailers and consumers,” said Federico Schumacher, PayPal’s general manager for Brazil and Mexico to the Brazilian newspaper Valor Econômico.

According to NeoFeed, the tool will replicate in the Brazilian market the same business model in operation on American soil, adapting only the rates and figures. In addition to the United States, Working Capital is now available in Australia, Germany, and Mexico. In the US, the company generated $10 billion in loans in five years, according to Valor Econômico.

The company has not disclosed what will be the criteria for the admission of sellers wanting to use the platform’s credit service. In the United States, the seller must have had a premium PayPal account for at least three months and at least $ 15,000 a year on the platform. Today, in the US market, they can qualify for seller loans that have a premium account for at least three months and move at least $ 15,000 a year using the platform.

Also in the United States, PayPal provides loans of up to 30% of the last 12 months’ average billing, with a ceiling of $ 97,000 on the first request and $ 125,000 on subsequent ones.

PayPal and “card machine war’’

Last year, the company bought the Swedish payment card company iZettle for $2.2 billion. iZettle operates in 12 countries, including Brazil.

With iZettle, PayPal will begin the battle against giants such as Cielo (Bradesco and Banco do Brasil), Rede ( Banco Itaú), and GetNet (Santander), and also against new and ever stronger players, such as UOL’s PagSeguro and Stone, which has just announced a partnership with the Globo group, and Mercado Pago, of MercadoLibre.

According to NeoFeed, PayPal’s target is the unbanked population estimated at 65 million people in the Brazilian market. Today, the company has 4 million users of its virtual wallet in Brazil. In the world, there are 280 million users of PayPal.

Acquisitions

To Valor Econômico, Schumacher said that PayPal is also interested in investing in companies in the country, since the company’s founders are major Silicon Valley investors and the company has a venture capital fund that makes investments in startups.

“The country needs more professional venture capital. And what we see is an ecosystem with Brazilian venture capital funds that have accelerated investment in fintechs, but we also see  global venture capital companies opening offices in Sao Paulo and contributing to those businesses,” said Schumacher to the Brazilian newspaper.