“We created Monnet because we noticed a growing need in the Latin American market”

E-commerce and the sharing economy have made the immediacy of payments and collections increasingly decisive and have imposed new needs on operators. While pay-in — the processing of payments received — has been the focus of many ‘fintechs’, Monnet Payment Solutions’ venture began with pay-out or the dispersal of payments to third parties.

Eduardo Luna and Franco Zurita, executives with experience in the financial sector, were convinced that there was a need not being met in the market and decided to create a suitable solution. They devoted all their time to the growth of what began as a project that they launched with their own resources, also facing the challenge of the complex context of the COVID-19 pandemic.

Monnet began operations in Peru, Chile and Ecuador in 2020. Almost five years later, it has processed nearly $4 billion, has more than 250 clients and a presence in nine countries. The company is moving forward with the medium-term goal of jumping outside the continent and becoming the first Peruvian unicorn. In this interview, Eduardo Luna details the evolution of Monnet, the challenges of the digital payments ecosystem in the region and the company’s future plans.

How did the idea behind Monnet come about, how did the company start and how has it evolved into a multinational with regional coverage in Latin America?

Monnet is a company that was born out of the conviction that there was an opportunity to be seized. The vast majority of payment processing companies are more focused on pay-ins, which refers to the collection of money related to online commerce, but we saw that there was a growing demand for pay-out services.

E-commerce, like other industries, is evolving, and a clear example is the emergence of taxi or mobility applications that connect drivers with passengers. This type of service means that not only do you have to process a lot of collections or pay-ins, but also a lot of payments. Pay-out solutions already existed, but they weren’t 100% direct. The existing systems had an SLA (service level agreement) of 24 to 48 hours, which was too long.

At the time, we presented a business case to the company we were working for, but it never came to fruition. However, the market continued to show us that the need existed, so the initial frustration of an unapproved project became the impetus that drove us to move forward. We decided to go it alone and founded the company in mid-2020, in the midst of the health crisis.

Your platform offers online payment solutions tailored to the local needs of each country in the region. What specific problem did you want to solve in the financial ecosystem?

Latin America functions as a different world, where there is a lot of cash and where many people live from day to day, so the immediacy of payments is a key issue. It makes no difference to a taxi driver whether you pay him tonight or tomorrow at noon. Our great differentiator is that we work directly with the main banks and payment points in each country, ensuring that payments are immediate.

However, the first problem we identified was the growth of e-commerce, which generated a significant volume of returns. E-commerce purchases generate a significant number of refunds, so our customers were asking us for solutions to manage them. We saw the opportunity and started working on it.

Monnet promises more efficient transactions. How have you managed to optimise costs and time in pay-in and pay-out operations? 

Our product is proprietary and direct. This allows us to avoid intermediaries and not depend on their processing times. Another important issue is the technology we use. In some countries, banks have real-time Application Programming Interface connections and allow instant payments. However, in other countries, they only have ‘host-to-host’ systems, which generate delays of between five minutes and an hour. In these cases, we have developed a semi-automatic system to speed up payments.

Although the process is not 100% automated, payment times are 28 minutes on average, which is unheard of compared to the old standards of 24 to 48 hours.

One of Monnet’s differentiators is its integration into different markets in Latin America. How have you designed your infrastructure to facilitate this expansion?

We started in Chile, Peru and Ecuador for two reasons: we were familiar with those markets and they were peripheral countries. Large companies tend to go to Brazil and Mexico first, so we decided to start in less saturated markets. Furthermore, we started with our own capital and this limited our options for entering larger markets. In the second year we expanded to Argentina, a large market, but one with many financial complexities and strong competitors. In the third year we took a big leap and opened in Colombia, Mexico, Honduras and Guatemala. And at the beginning of this year we landed in Brazil. We are currently operating in nine countries.

How have you raised the funding you need to grow?

We started with our own resources and later resorted to bank financing. It was very hard at the beginning. When we started, many banks didn’t even want to open accounts for us. And I understand why: we were two middle-class people planning to move a lot of money. That obviously raised all kinds of red flags, especially with a product they didn’t know about.

In the first year, everything that the entrepreneurship books said happened to us: we sold the cars, we lived off credit cards and we went through the uncertainty of whether to continue or return to the corporate world. However, we survived that Valley of Death of the first year in which more than 90% of companies go bankrupt and 2021 was literally a boom year. We made good decisions, we had some luck and a few months later we got our first big client.

What is your strategy for growth and expansion in Latin America, and are you considering new markets?

This year we will focus on consolidating our position in the region, both in terms of products and our presence in new countries. We still have some markets in Central and South America to cover, such as Bolivia, Paraguay and Uruguay. From next year, we aim to expand globally. We haven’t yet decided which countries, but we will have experts to lead this expansion phase and ensure the sustained growth of the business. In the medium term, we aim to be the first Peruvian unicorn and begin our global expansion.

What are the advantages for a fintech like Monnet of having strategic allies in the financial sector, such as BBVA Spark?

Having this alliance is very important for us. Traditional banks often prefer to say “no” when they don’t understand a business model, so the fact that there are banks like BBVA Spark that are willing to sit down and listen completely changes the landscape. We are glad that there is a bank that understands fintechs better. We have come to BBVA Spark through Colombia, which is a relatively new market for our company, so we still have a way to go together. Hopefully we can do many things in the future!

What challenges do entrepreneurs in Latin America face in the area of digital payments? What support do you see as key to driving innovation and financial inclusion in the region?

The main challenge is the maturing of the sector, with the introduction of regulations that increase competition and require stricter compliance measures. Co-creating regulations with the authorities will be key to ensuring that they are functional and adapted to the market. For example, in Colombia, the Asociación Colombia Fintech has been an important player in ensuring robust regulation. Collaboration and rapprochement between fintech, banks and governments is essential.

What advice would you give to an entrepreneur who wants to launch or scale his or her own project?

I would give three key pieces of advice to any entrepreneur who wants to launch or scale up in the fintech sector. First, make sure that your product meets a real need and that the demand for that service is growing. Thinking of a solution linked to the handling of cash, for example, may solve a current need, but it is clear that cash is losing ground. Secondly, I would tell them to think with a regional or global vision from the start, but always adapting the product or service to each country. And finally, I would recommend that they hire the best, no matter where they are. Globalization allows us to get the best professional for each position anywhere in the world.