In Latin America, where many consumers are unbanked or underbanked, roughly three-quarters of consumers don’t have credit cards, so prepaid cards are widely used to pay for everything from streaming media to utilities.
For some companies, prepaid cards can represent as much as 70% of their business, Wallet Guru co-founder and CEO Emilio Rubio told Karen Webster. However, getting those cards (whether plastic or digital), sifting through promotions, loading funds onto the cards themselves, and then reloading them can be time consuming and frustrating — and laden with fees.
“This is money that they have to pay up front, and fatigue is driving churn,” Rubio said.
That means that companies — especially streaming firms and cellphone firms — lose consumers they have spent money and time acquiring. Replacing that lost business, or luring consumers back, takes more time and money. Even without the churn, the cost of prepaid can run as high as 10% of the sales that firms garner through those channels, he said.
Wallet Guru is in the midst of building a business model that Rubio said will give consumers an easier way to access and pay for basic, essential services, boosting financial inclusion, while lowering costs for the providers themselves.
Wallet Guru and the Interledger Foundation announced Oct. 24 that they partnered to create what they called the “underlying infrastructure for a new pay-as-you-go system,” facilitated by a Wallet Guru consumer-facing digital wallet, a business-facing platform and Interledger’s protocols to enable consumers to pay with traditional or digital currency, with no bank account required. Payments are rendered in real time, calibrated to the content or service consumed.
“You’ll be able to integrate your wallet with our services and with Interledger in a way that is seamless and cross-border friendly,” said Rubio, who noted that Wallet Guru can function as both the wallet application and the infrastructure that connects the wallet to the network, in the event that corporates do not have their own wallets.
“In that case, we’ll be the application that connects them with Interledger,” he said. “In other cases, we will be a full solution.”
Wallet Guru makes money by charging a small per-transaction fee to the client companies.
“This is going to be a big revolution,” Rubio said, as the platform is slated to go live in the first quarter of next year and alpha tests are currently being conducted. Initial use cases are with video streaming (Rubio previously helmed HBO’s Latin American operations); the eventual roadmap will be international in scope, across a variety of industries.
Informed by his own experience at HBO and observing the explosion of digital payments and wallets in countries like Argentina and the growth of instant payments system Pix in Brazil, Rubio said the potential exists for payments innovation to take root elsewhere in Latin America.
The digital channels help sidestep some of the pain points of setting up accounts with traditional banks — many of which are not equipped to handle thousands upon thousands of small clients, he said.
Consumers benefit as they will never leave unused balances on cards if they stop using a service or provider; providers benefit through efficient marketing spend. The positive ripple effect across the ecosystem is better cash flow management and better competition. Content providers must give consumers what they want, or they risk content going unconsumed.
“What we’re changing, too, is the consumers’ commitments,” said Rubio, who added that the flexibility of the pay-as-you-go model will incentivize consumers to consume services more often, rather than paying for it all in “big chunks” and perhaps never consuming what they paid for.
“The consumer is in charge, and this is giving them power and flexibility” with the pay-as-you-go model, Rubio told Webster.
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