The World Bank estimates that more than 250 million people in Latin America — about 61 percent of adults — do not have bank accounts or access to formal financial institutions and have to carry out all their transactions in cash.
They are called “unbanked.”
As the middle class has grown throughout the region in recent years, this large group of individuals, who often live in enormous, crime-ridden slum cities, receive cash from their employers and have to pay all their bills — the local food store, cellphone, drugstore, etc. — in cash and face the daily threat of robbery and theft in their communities. Many of these millions have set up microbusinesses, and must cope with the same problems.
NovoPayment, a Miami-based financial services company, is helping part of this huge unbanked population with systems that provide stored-value cards, debit cards, payments by cellphone (mobile wallets) and other services.
Companies affiliated with NovoPayment use these non-cash options to pay employees. The employees then can use these instruments to make personal or business payments, avoiding the need to carry cash.
“We connect banked and unbanked individuals with banks, telecommunications companies, utilities, retail stores and other companies,” said Anabel Pérez, the company’s president and CEO. “There is a huge potential for these types of services in Latin America, and we have been working to serve this market since 2004,” said Pérez, a Venezuelan who has lived here for several years.
Working with a variety of regional businesses and financial entities, including MasterCard, NovoPayment uses its own technology and applications to provide a range of services to banked and unbanked individuals and small businesses in Colombia, Mexico, Peru and Venezuela.
NovoPayment was founded in Caracas, Venezuela, in 2004 and moved its headquarters to Miami in 2007. “Miami has the location for connecting with Latin America, the infrastructure, and a good mix of skilled talent from all over the region,” said Pérez, who received a law degree from the Andrés Bello Catholic University in Caracas but, instead of practicing law, went directly into banking.
“Just like people go to Silicon Valley, people are coming to Miami — it offers the right conditions for start-ups,” she added.
The company has six employees in Miami and a total of 260, including its subsidiaries in Venezuela, Mexico, Peru and Colombia. It also has software development centers in Colombia, Mexico and Venezuela.
“We pioneered prepaid cards when we started in Venezuela, and now offer a variety of non-cash and e-payment options,” said Pérez who was among the group at the Banco Venezolano de Crédito in Caracas who developed the concept when it was being set up.
How does NovoPayment work?
In Venezuela, for example, a NovoPayment unit, Servitebca, handles payrolls for McDonald’s, Atento (a business outsourcing and customer relations management firm) and Burger King with prepaid cards. It also replaced paper food vouchers issued to employees by other companies with reloadable plastic cards. While the people with these prepaid cards have an “account” with the card company, they do not have a bank account and not do need one to move their money.
In Peru, currently the company’s largest market, NovoPayment launched the first reloadable prepaid card, under the LATODO MasterCard brand, for people without bank accounts.
Holders of these cards receive payments directly from their employers and can make purchases at stores or online and pay bills. They can also withdraw cash from affiliated ATMs and, with cell phones, make person-to-person transfers and check their balance. The cards can be reloaded at over 2,200 retail stores, pharmacies and other sites.
The company also offers other services to regional and multinational companies, such as control of employee travel expenses and managing incentive programs, and to governments that want to simplify making Social Security or other payments.
Pérez noted that aside from providing a service to people without access to banks or other financial institutions, NovoPayment helps microbusinesses that thrive in the extensive slums surrounding Latin American cities. Someone who sells pots and pans in the local community, for example, now can use a NovoPayment option to receive payments and pay bills. As a result, the vendor doesn’t have to carry cash — and face the threat of robbery — in areas where there is little or no police protection.
Today, NovoPayment has more than 9,000 large and small companies as clients and serves 1.5million individual accounts. The company, which is owned by about 50 Latin American investors, expects revenues to grow by 20 percent this year. It plans to expand services in existing markets, and to begin offering programs in Chile and Central America.
While NovoPayment was at the forefront of offering non-cash options for people without bank accounts, it now faces competition from a variety of sources, including banks and other financial service companies.
“Our biggest competitor is cash,” Pérez said.
NovoPayment has been recognized for its services and technological achievements. In 2008. the company received the Greater Miami Chamber of Commerce’s International Business Leadership Award. And Paybefore, a publication specializing in international coverage of prepaid, mobile and emerging payment systems, gave the company its Most Effective Solution Award for 2013 and in 2011, said it had the best corporate-funded prepaid incentive, reward, rebate or loyalty program.
Miami-based Mobile Financial Services (MFS), a joint venture with MasterCard Worldwide and telecommunications giant Telefónica, has been working with NovoPayment for two years, said Tony Ferri, chief technology officer at MFS.
In Peru, “many people don’t trust banks and have to carry out all their transactions in cash.” Using NovoPayment technology, Peruvians without bank accounts can obtain a prepaid MasterCard at local stores, link it to their cell phone number and, after paying some cash into their new electronic account, use the card or phone to pay bills and transfer money. The payments are handled by a local bank affiliated with MFS.
“The results have been much better than we expected,” Ferri said. “We’re planning to expand from Peru to 12 other countries in Latin America. The reception among consumers in Peru has been truly positive. ”
Business: NovoPayment helps individuals and small businesses in Latin America receive payments and pay bills via stored-value and debit cards, e-payments and mobile wallets. This Miami-based financial service company has developed programs and uses cloud technology to connect people and businesses with financial institutions, retailers, telecommunications and payment networks, companies and governments. It also provides services such as designing payment programs.
Headquarters: 1111 Brickell Ave., Suite 1580, Miami.
President and CEO: Anabel Pérez.
Subsidiaries: Colombia, Mexico, Peru and Venezuela.
Founded: 2004 in Caracas. Headquarters moved to Miami in 2007.
Employees: 260 total, six in Miami.
Clients: Over 9,000 companies with services reaching 1.5 million individual accounts.
Software development centers: Venezuela, Colombia, Mexico
Revenues: Projected to grow 20 percent in 2014
Ownership: Privately held by about 50 Latin American investors
Awards: 2008-2013 awards from Paybefore; 2008: Greater Miami Chamber of Commerce’s international business leadership award.