Half of the Argentine population has never used a credit card. Plain and simple fact. From this statement, Pierpaolo Barbieri drew an idea: why not give these people access to a card, without having to pay for a bank account – which many Argentines have avoided since the 2001 financial crisis. Welcome to Ualá, the bank of the 21st century.
Verifying payments on your smartphone. Identifying yourself via selfie. Making transfers without extra costs. Not paying an annual membership fee. Customer support via Facebook. These are all the features which make Ualá modern and simple at the same time, and the reason why it has already convinced more than 100,000 users, who only need a phone (with Android or iOS) and a Wi-Fi connection to get started.
Ualá allows you to make payments without charging commission, and to make two free withdrawals each month. To top up your card, clients can use services such as Pago Fácil, CCBU or Rapipago, without any fees. The name Ualá comes from the contraction of Wallet, and Voilà (French word which means “there”), which also explains its fundamental concept: a quick and easy way to pay.
Pierpaolo Barbieri, the founder of the company, has an interesting CV. Having graduated with a degree in History and Economy from Harvard (he then studied at Cambridge), he wrote a book about Hitler and Franco’s relationship before heading into the finance world, though he continued writing articles for various newspapers on the side. He is currently based in New York, where he is meeting investors -including names like George Soros- to talk about the development of the company. Speaking with The Bubble, Barbieri gave us some insight into the ethos of Ualá and the future of banking.
The Bubble: How does an economic historian come up with the idea to create such a business and was it hard to launch the project?
Pierpaolo Barbieri: I have been thinking about Ualá since 2015, and we started working on it because I saw how the local banks worked and we wanted to create something totally different. We talked to a couple of players in the local market and they all said that a card without any fee wasn’t going to be possible in Argentina, and we wanted to challenge that.
It is not something that I had studied, but as you said I did some financial history and I worked in the world of investment, in a fund that was investing in Argentina into existing banks, we saw how those worked. The idea behind Ualá was to bring further inclusion into the financial system in Argentina, and that required us to build our own technologies and processes because it had never been done before.
What have your preliminary results shown so far, are they better than expected?
To be honest, they are way better than what we expected. We launched on October 4, 2017, thinking we could issue 10,000 cards that year and maybe reach 100,000 by the end of 2018. In the end, we reached 35,000 at the close of 2017 and we are currently over 140,000 cards issued – we already [surpassed] our expectations, in April! We are really happy with the results, and every week we gain more interest with a lot of organic downloads, meaning that people are recommending Ualá to other people. They love that you can analyze your spending, see the live transaction, which nobody can do in Argentina, and many people tell us how wonderful it is to send money to their friend in a free and easy way. As you know, in Argentina everything is done in cash, and we were able to reduce the pain of always having to carry bills, and all our features are helping people which I think explains the interest in the platform and our success.
Do you have a demographic data on your audience’s profile, are they younger than what you expected?
Well in reality, nothing like this had been done before in Argentina, so we did not know what to expect, or who was going to sign up. But what I can tell you is that over 70 percent of our users are younger than 30, and we are the only card in the country which can be issued to people between 14 to 18 years old, if you have the approval of your parents or guardians. We have a real focus on people outside Buenos Aires, because is it difficult in Argentina to have access in banking institution outside of the capital. As a result, 50 percent of our users are outside the Buenos Aires area, and one of the thing I am the proudest of is that we managed to issue cards within three days to every province, from Jujuy to Tierra del Fuego. We are really happy about the penetration we were able to make into the Argentine market; we have users, transactions, and purchases all over the country and our numbers are constantly growing.
Are you projecting yourself -and your company- in the long-term by saying: if the parents use the service to control what their kids are spending, the kids that are between 14 to 18 now will use Ualá later in their lives?
Well yes, but what we are seeing is that it is the kids who are telling their parents about Ualá; they start using it and parents sometimes write to me to say, “what a great way it is to send money to my kids and to control my expenses! I don’t know why I was paying a thousand pesos a year for another MasterCard or Visa without benefits, save a 20 percent discount for a place I never go.” Our approach is different to those of traditional banks; what I am trying to change is to give our clients a simple and honest service, which can control their expenses, hep them save, and to know what they are spending rather than to give them targeted discounts in places they don’t go to. Sometimes, banks will give miles to clients that have never taken a plane in their lives!
On Ualá, [users] will see that there is zero charge and people are receptive to that message, because they don’t want any hidden fees. You were talking about our audience, they are young and happy to pay for services such as Netflix or Spotify, but they want the pricing to be transparent, and the first thing Ualá could be qualified of is simple and transparent.
Regarding these new users, I have noticed that you worked on your company’s Facebook page, offering customers support through it, as well as your YouTube channel. Are these social networks important to attract new users?
Yes, of course. We are an app service, we have done no traditional advertising and we don’t pay to show up in the media, so we are just developing thanks to people using our services and telling their stories. I love that when I go to YouTube, you have many people that have done videos on Ualá, but they haven’t been paid by us, they do it because they love what we do. Steve Jobs used to say that you must build products that are so good, people will go out and recommend them on their own, and that is what we are trying to do. We do not spend our money on marketing, we simply build great products and if people love them they are going to share them with their friend and family. And it is working, I think, because it is an honest product and something different people see, love and share, and that is the best kind of marketing you can gave.
So on the social networks we usually just tell stories and we don’t pay for TV ads, the cards are just working thanks to the word of mouth and this is the most powerful thing.
Many Argentines were affected by the 2001 crisis which created their mistrust of the banking system. In an interview you said that “for a long time, banking in Argentina has been a tax on the poor, and that is what we want to change.” How do you combine this social mission while also turning a profit?
Well first of all, we are not making a profit yet, and we won’t for a long time. What we are building is a totally different financial institution. As you said, I am a historian and what I studied was financial history, and the banks are physical places because of how in the United Kingdom and France we built financial institutions when the middle class was created in the 10th century. Banks went from the rich in Italy to the middle class in Germany, the UK, and France, but nowadays what I am trying to build is a 21st century bank which could be a non-physical place where you don’t have to queue, wait, and be frustrated; everything can be done through your phone in a transparent and novel way.
This is what we’re trying to build, we want a plural product to get to the people the financial system had long ignored, just like the European banks approached the middle classes. I am not proud of the fact that in Argentina, more than 50 percent of the people haven’t ever paid with a bank card; it is a crime! These people need to be brought in the system and given opportunities, because only when you’re into this system can you think of entrepreneurship and taking risks. We can’t just let these people operate in cash, because it is not safe and they are being damaged by inflation.
So no, we are not making a profit yet but we found investors that are willing to wait a long time to build that. Eventually, it is going to be a great business, but for the moment we are just working on building something different. In Argentina, one of the problems is that people are trying to make a profit quickly, but this isn’t how you make a sustainable business. If you look at Spotify, Apple, or Facebook, these are companies that weren’t profitable on day one. You have to build a product, which takes time and effort, especially when you are trying to change a paradigm like we are doing. Therefore, for the moment we are lucky to have these investors that are willing to wait with us and to have people that are liking what we are doing. The bigger we are going to be, the more Ualá users there will be and the better the product will become.
Where are you planning to make these future profits and what will be your business model? Are you going to make any use of the numbers and data you might collect through the app?
No, we don’t sell data to anybody. What we are going to do is to offer other services, it won’t just be the free card, we are going to do loans and investment products, but these offers will be launched in the future, and I can’t talk about a date because we are still working on them. We are trying to do other products to be able to do what financial institutions are doing, but doing it better and cheaper for users, products that we hope will resonate as much as our prepaid cards did.
What are the differences between Ualá and other services such as Caxton or Revolut which can be viewed as similar?
They are different because they’re built for other businesses. Revolut is for the European market; everybody already has a free card, because checking an account in Italy or France is free. In Argentina, people pay a lot of money for services which should be free. Revolut for example is targeted for travelers who already have a bank account. It is a wonderful product, but we are targeting something different; we want to completely replace the banking institutions, when Revolut is only here to complement them.
We want eventually to become your home in terms of finances and we are going after a different mission, and part of what we do is also educating our users and teaching them how to use the cards.
You have managed to get important investors behind you, such as George Soros. What was the process in getting them to back your project?
They were really excited about what is happening in Argentina, and the way the country in opening up. They wanted to see a business plan and a real team behind it, and that is the best thing about Ualá; not the idea but its execution. Many people have good ideas but it is the team which executes. Our development team is constituted by people who left jobs at JP Morgan, Santander, Google, or Mercado Libre, and they all joined us because they were convinced by the ability of the team to change a paradigm. Obviously, we hope this idea is revolutionary but at the end of the day investors trust us, because our team is executing.
We did not talk too much during the years the project was slowly moving. In Argentina, I think too many people talk before they execute. They talk about project they will never achieve. I don’t want to talk about what I am doing, I just want to tell you when it is done. I am with a team that exists to execute, and I think that it is what convinced our investors.
Were they scared of investing in an Argentine company?
No, they were really excited and they think that the number of talented Argentines is extremely high, and so is the quality of development. They think that Argentina is the best place to launch and develop Ualá before thinking of it as a regional product.
Because you already have plans to expand to other countries in Latin America?
Yes, we are going to expand, but we first have to deal with the amazing demand that we have in Argentina. As I told you, we have issued three or four times the amount of cards that we expected, so we have to control that what we are building is matching this demand. Then, we will think of some international markets but we have to prepare the further development of Ualá, because we have some new things coming and this is another important things about us; we don’t want Ualá to be just a simple product, it is a growing one that evolves with the users.
As you might have seen on our Twitter page and other social media, we do want our users to ask us for things. For example, some wanted to be able to send a message with their transfer, to explain why the money was sent, so we added this feature. We are building what the consumer wants, and I don’t think there is any other financial institutions out there which thinks that way. Our users are our partners, they make our products better and we want to know what they want.
Now that you are living in New York, do you feel the vision around Argentine economics, due in part to Macri’s election, has changed? What are your thoughts on the policies meant to draw foreign investment?
I don’t think it is just about one person. I think it is about the opening of our country and I think people are excited by what is happening in it, not just in technology but also in the energy sector, in construction, in mortgages, in retail… There are loads of sectors where the Argentine entrepreneurship feels stronger that how it did five to ten years ago. We are living in a society with more and more start-ups, and it is better because you feel like you are in an eco-system. For example, I would like some competition for Ualá, because that would speak well of the country and the people who are finally taking a chance and creating something.
Inflation is a persistent issue for Argentina. As a company which does not have many physical costs -except the plastic cards in itself- does inflation affect you, if at all?
(Laughter) Well first, it is really expensive to make the cards! But inflation does not scare me, I think that the Central Bank is making some incredible policies, obviously it is a problem and not an easy one, but I think it is getting fixed and that inflation will go to single digits in the next 18 months.
We started in a bad place but it is headed in the right direction, and it is perfect for investments in the whole country. Investors would have been scared of inflation if there wasn’t any plan to fix it, but the truth is that there is one, and it is incredible.
I read that you were preparing yourself for the future evolutions of the banking world, such as mobile payments. Will you also concentrate your efforts on markets without structural banks such as India or Africa, where mobile payments are more advanced than in more institutionalized countries?
For Ualá itself, for now it is only Argentina, but it will be regional in the future. We are not experts in Asia or Africa as we are in South America, but there are a lot of great things happening there especially in mobile payments. In Asia, it is often ten to fifteen times more developed and they have more transactions than in the US, so we are looking at the different models to adapt and to create our products, but it is for now just for Argentina and the region.
Finally, what are you plans in the near future for Argentina?
We are going to expand ourselves by offering credits and investments. There will be lot of new features appearing ,but I don’t want to go into too much detail because I don’t have a date.
I can tell you that the best is yet to come, and that what you see in Ualá is just the beginning, we work extremely hard with a committed team to build a great technology that is revolutionary for our financial market. We are here for long-term, a hundred percent.