It doesn’t even look like a bank. And it is not meant to look. With a new brand, now without the word “bank”, the Inter you no longer see yourself in a single competition arena. The enemy now is another: the goal now is to fight on an equal footing not only with the banks but also with the giants of electronic commerce, such as Mercado Livre and Magazine Luiza.
For the president of Inter, João Vitor Menin, this is not only a path of no return, but also a two-way street. “An e-commerce platform that has no payments and credit is out of the game,” said the CEO in an interview with Your money.
Last year Inter launched a “super app”, which brings together in one place not only traditional banking services but also an investment platform and a “mall” that has more than 100 partner stores. It was to reinforce this platform, including via acquisitions, that the company raised almost R $ 1.2 billion in a new offering of shares.
Inter hit yet another mark last Friday by reaching 7 million customers on its digital account without fees. With the coronavirus pandemic, the growth curve, which showed signs of stabilization, gave a new “ramp” – in Menin’s words.
Maintaining the current pace, Inter should end the year with up to 9 million account holders and end next year at the level of 15 million. But how far can it go?
“Opening our platform not only for account holders, but for Inter customers, exponentializes our market. So I believe that we can enter another growth curve ”- João Vitor Menin, president of Inter
Menin sees five major growth avenues for Inter: banking, credit, insurance, investment platform and e-commerce. With the money raised from investors, the plan is to reinforce mainly the last two deals, from where the planned acquisitions should come out.
“Don’t expect any blockbuster,” said the president of Inter, when I questioned what kind of business was on the radar. The idea is not to “buy customers” with the acquisition of a competitor, but to incorporate companies that bring experiences that the institution does not have within these business areas, such as payment technologies and services for the e-commerce business.
Launched at the end of last year, Inter’s marketplace showed the first signs of its potential in the second quarter, with a total sales volume (GMV) of R $ 123 million – three times higher than in the first three months of the year. In the month of July alone, the number jumped to R $ 115 million.
On the investment side, one of Inter’s bets is on the content part to assist clients in decision making, since the institution does not work with the figure of independent investment agents, the model consecrated XP Investimentos. Inter’s platform reached 760 thousand active customers in the second quarter, an increase of 179% in 12 months.
The business advance boosted Inter stock certificates (BIDI11) at B3, which accumulated an increase of 12.7% in the year. In September, however, the units experienced a 19.15% loss, following the global fall of technology companies.
For Menin, the current discussion about the evaluation of the sector and of Inter itself is a matter of reference. “If at the end of next year we can be the largest in Brazil in terms of digital account holders, and if we reach something like 20% of a B2W in the marketplace, is this asset expensive? I don’t know … ”, he said, faithful to the mining style.
Read below the main parts of the interview:
Inter has just closed a share offering of almost R $ 1.2 billion to invest in new products and acquisitions …
Look how interesting: we made three public offerings of shares in 30 months and we raised more than R $ 3 billion. This gives R $ 100 million per month, always in primary offers, with money for the company. I think it’s a record at B3. We managed to grow the volume of business and also the capital to work with musculature.
And what to do with the funds raised now?
We separate the resources of the new offer into two large installments. The first to support organic growth, with more customers and more credit portfolio, which leads to more regulatory capital. The second portion, let’s say, will be used in strategic acquisitions.
Can be more specific?
We divide our business into five avenues: daily banking, loans, insurance, investments and the marketplace. I don’t see any acquisition that makes sense in the first two areas. In insurance, we have already done the deal with Wiz. What was left? investments and marketplace. We will focus on these two verticals, even more on the marketplace, which is a more recent business, so there is still a lot to add.
Are any major acquisitions planned?
Do not expect a “blockbuster”, because it is not our style. We don’t want to buy a customer, a credit portfolio or an insurance premium. We want skills, team, know-how, product. Among the things that may appear are the acquiring part, such as payment gateway.
We are also studying this whole “fulfillment” part. For example, today in our app you buy a Samsung phone directly from the store. But someone has to pick up that phone, issue the invoice, hire the carrier and make sure it arrives at your home. For us it is not worth building this capacity, we can buy a company that is good at it.
In the investment area, the content part is also important. Our platform’s footprint is “B2C”, directly with the investor. We do not have the figure of the autonomous agent, so it is necessary to provide tools for the client to make a decision.
How many clients does Inter have today? Is the pace of growth continuing or is it slowing down?
We will hit the 7 million customers in the next few days [o banco alcançou a marca na última sexta-feira]. We were starting to “bend” the growth curve, because the numbers are getting big. Then the pandemic came and took a new “ramp”. People who are having trouble buying insurance and borrowing come to our app. At the same time, they are investing more on their own. E-commerce, then, is not even mentioned. In all verticals we are positively atypical. Now, we have prepared for this, aiming a complete, digital and scalable platform back there.
How does the arrival of the Central Bank’s PIX instant transfer system affect Inter?
With our free account, today we spend to send TED to other banks because we do not charge the customer. With PIX, we are going to take a huge expense off our balance sheet. So we’re rocketing here, because it represents a cost reduction and a better customer experience. We already have almost 700 thousand PIX registrations in the bank, with numbers growing every day.
Speaking of number of clients, what does Inter expect from now on?
When we had only account holders, we said that our total market was around 100 million Brazilians. Now, with our app for account holders and non-account holders, the market is 215 million Brazilians. We even changed the brand and removed the word “bank” so everything is concatenated. The company has today become much more of a digital platform for financial and non-financial services than merely an average digital bank. So our brand has to portray what the company is.
Now, when we think about closing this year between 8.5 million and 9 million account holders and, perhaps, closing the next year at 15 million, is it already the ceiling? Can’t we think of more? Opening our platform not only for account holders, but for Inter customers, exponentializes our market. So I believe that we can enter another growth curve.
The marketplace started to operate in the second quarter. Will Inter fight in digital retail with names like Mercado Livre and Magazine Luiza?
This was the most discussed subject in our most recent stock offering. We actually think the opposite. An e-commerce platform that has no payments and credit is out of the game. The Free Market has already realized this, now Magazine Luiza and B2W too. So we will compete with e-commerce and e-commerce will compete with us. These things are coming together and it has to be that way.
How do you see the investment platform dispute with Nubank’s acquisition of Easynvest?
For me, it reinforces the importance of being a complete bank. Nubank had to buy Easynvest, and until the transaction is approved it will probably only start operating next year. We have our DTVM [distribuidora de títulos e valores mobiliários] since 2016. This is an important aspect.
We believe that the Brazilians in the middle of the pyramid will stop investing in a bank branch with the manager. These are the people who started to invest in XP, but we think that the middleman in the middle, the autonomous agent, does not make sense and has a conflict of interest. We want this investor to help himself here at Inter.
This middle class and even those on the bottom of the pyramid will have to leave savings. Having the same banking service and brokerage in the same application is the best of both worlds. Modesty aside, I would say that we are the best positioned platform for surfing what we call the 3.0 investment wave.
Do you expect more consolidation in the investment platform market?
Yes. A broker, even one that has modernized, but only does brokerage, will be lame, unable to compete. The customer will end up gathering somewhere, for the platform that offers the most benefits.
On the other hand, with so many simultaneous initiatives, isn’t there a risk that Inter will lose focus?
Obviously, it is easier to be an investment company or just a bank. What we try to do is to simplify our products. In the e-commerce part, we do not deal with inventory, we only enter the distribution layer. The same is true in insurance. We always try to get into the “asset light” part of each of these verticals, with products that talk to our customer base, so that we minimize complexity. It is still difficult, but it is good that it is because it is also more difficult for someone to copy.
Inter is a technology company, and recently the evaluation of these companies has been questioned. In your view, are the sector’s shares expensive?
It’s all about reference. In our case, how much should the deal be worth, R $ 1 billion or R $ 100 billion? See how much the guys who compete with us are worth in e-commerce, investment platforms, digital banks out there. When you take these metrics, Inter is even cheap. Now, if everyone starts to be less, if, for example, a person with 50 kilos is considered fat and you are 70 will be fat too. What we are doing is disruption, innovating and growing. If at the end of next year we can be the largest in Brazil in number of digital account holders – perhaps the fourth largest in account holders in general – if we reach something like 20% of a B2W in the marketplace, will this asset be expensive ? Do not know…
What is the main risk for Inter?
When asked what our “black swan” is, I say that it is the cyberattack part. In all digital companies and digital platforms this is the big risk. And this is a tough fight because you are dealing with the underworld.
At its current size, with 7 million customers, is Inter today a sustainable business?
I think we already broke the surf. We have scale and relevance to negotiate a good card business with Mastercard and with Liberty in insurance. We already have relevance to negotiate a take rate in e-commerce for the buyers of our mall. If we stopped growing, profitability would grow a lot. It would be bad on the one hand, but from the point of view of profitability it would be great.