MIAMI – Venture capital (VC) investment across Latin America is unlikely to regain broad momentum in 2024, although funds are starting deals with startups considered undervalued, according to Ebanx. says co-founder and board member Wagner Ruiz Bloomberg Tax.
„If we are talking about a 50% decrease in prices for funds two years ago, there is a chance,” He said Bloomberg Tax During AS/COA’s annual BRAVO event in Miami.
On Ebanx’s growth strategies for 2024, he said M&A will always be part of the playbook while expanding geographically. The cross-border payments company is currently targeting India and Africa, but no transactions are currently on the schedule.
Despite global economic uncertainty and pricing pressure from customers, Ruiz expressed confidence in the company’s prospects for cross-border consumption, which will allow Ebanx to maintain profitable levels and its growth rate of 30%.
He also stressed the need for continuous improvement in efficiency, maintaining a business-centric approach and moving forward in terms of payment systems and regulations..
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The following dialogue has been edited for length and clarity.
Bloomberg Linea: What is your take on how Ebanx and other fintech companies in Latin America have adjusted to the high-rate environment after the pandemic?
Wagner Ruiz: I think we have two main points. You’re talking about interest rates, the whole economy and all countries and regions, so you’re talking about consumption. Also, as the markets have changed over the past two years, we have seen an adjustment not only in the growth outlook of all fintech companies, but also in their operations. Especially in Brazil, in Latam, it started two years ago, and now we can see an adjustment and a more integrated landscape for these companies, including Ebanx.
How do you see the growth strategies of these companies in 2024?
On the growth side, it’s funny because we’re talking about debt, we’re talking about possible recessions in other big countries like the US and China, but at the end of the day, we’re still going to see growth.
Our specific business is cross-border consumption. So we still see a good CAGR [Compound Annual Growth Rate] For the next four to five years at least. So in the region we are still talking about 30% a year, which is not bad. Of course, we are also looking at other regions. As you know we are now operating in Africa, Asia, India, at least starting with India, you will see big growth in the next few years. Of course, there are some concerns about the global picture, including China and the US. But we still see growth for the region and a huge opportunity for these new two regions, Africa and India. If you look at digital buyers, we’re still talking about 3% to 4% annual growth rates. This is what sustains the growth of cross-border e-commerce in the region.
Have you faced any pressure from customers over the past year regarding pricing?
I think it’s natural and yes, everyone faces it. With all the innovation we see in the region, in payment methods, how easy and transparent, the pressure on prices is natural. PIX in Brazil is a local transaction, at least for now, yes, but it’s because of interoperability, it’s related to cards, it’s cross-border, it’s related to everything. So now there is more understanding from the merchant side and from the consumer side, and it is natural that there is more competition and more pressure on prices.
Beyond pricing, what are Ebanx’s main challenges in adapting specifically to this high-rate environment?
I think it’s a challenge to be better every day, but it’s not a bad challenge. So when it comes to Ebanx, we are always business oriented. It’s funny because if you look at our background, the three founders, me, Alfonso and Joao, we used to fly to the US 25 times a year to show them how difficult it was to talk to business people. To do business in Brazil. So we’ve always had this business-centric position, which is something we have to improve every day.
So, nowadays we’re talking about performance twice a week, and a basis point change can affect everything among competitors, and it can change everything for traders. The challenge is to focus the business on the different needs of each merchant, but it is another matter to look at the options in terms of performance and payments. Payments are always adding new options. We launched PIX on the first day of PIX in Brazil. We were working with Uber in Brazil because they said they wanted to launch on day one.
So you can imagine how you can build a structure where the central bank and the sandbox and everything can start on day one. I think these are measurements. So you have to be amazing in performance, you have to have all the services and add-ons for merchants, and you have to be ahead of the game, including payment systems.
When we started Ebanx we focused on Latin America, not because we don’t like other countries, but because we want to become the best in this region.
Wagner Ruiz, Ebanx co-founder and board member
What sets Ebanx apart from competitors like dLocal, who signed Pedro Arnt as co-CEO, based on your value proposition?
They do their job on the overall value proposition. Of course, we are talking about cross-border payments. They do, we do. We believe we have deep knowledge about structure, about regulations, about tax, about efficiency, about how to do things well, and I call this a merchant-centric package. It’s not just Ebanx or dLocal. We have other players, smaller players, but we have them, and this is the pitch: How can we use our knowledge to improve their sales? When we started Ebanx we focused on Latin America, not because we don’t like other countries, but because we want to become the best in this region.
So, own the rails, knowledge, even control. You know the rules are changing. A little less now, but since 2012 there has been a big change, especially in Brazil. So we focus on being very compatible and we show that to our merchants and we look at price, performance and all the other services and information from the region to give them the best. I think that’s our point of difference, especially because of everything we talked about about the macro environment.
Do you expect profits to decline next year due to customer pricing, cost-cutting and a slowdown in the region’s economy?
No, I don’t think so. Look, we manage, as I say, not only Ebanx, but companies that are associated with these types of payments. We are still looking at TPV (Total Payment Value) growth. There is a lot of competition, but I think there is a threshold for that too. So I don’t see a big decline, it’s very tight, but I think that’s what we learned in the last turn of the market. First we had the pandemic, didn’t we? We survived as a world, as a country, and then a change in the market, and a bear market. Now we’re dealing with these risks in macroeconomics, but I think everybody’s in the same boat, so I don’t see a big turn in profits because even when the market has turned, everybody’s moved towards growth towards profits, right? So, this is the new law of the market. We still see consumption growth, especially when we talk about cross-border. We still see 30% CAGR overall.
Is there any possibility to resume your IPO?. How do you see the environment for tech IPOs over the next few years?
It is no longer in our pipeline. I think it’s too early. Everyone is waiting for the next rush. But there are many other big problems in the world right now, so I don’t expect much about the market or about Ebanx for next year’s window. I don’t see this changing anytime soon.
Do you see any relevance to this year’s peak in VC investment in the third quarter? Could this be some kind of breakthrough?
The market was more or less closed six months ago, with smaller companies, especially in Brazil, and in the region, seeing investments come back because there is an opportunity. If we are talking about a 50% price drop for funds two years ago, there is a chance. I can see this as we are also investors in other smaller companies on a personal level. So you’ll see funds, VCs in particular, coming in, and private equity looking at big companies and saying this is undervalued, so we can do it. So I believe it will come first. These movements come before a movement in the broader market. So I look at the opportunities for the next 12 months.
How important is the AI revolution and investment in automation at Ebanx right now, and how does that impact your workforce needs?
When you talk about AI, usually regular people, they think about chatbots, questions and how to respond to the customer. Because of our fraud rating, we’ve been doing that since the beginning. So, intelligence started with machine learning, right? At Ebanx, at least, we apply this insight specifically to fraud and now build something to increase performance, routing, understanding what’s best, which provider and pricing. But of course, not like the AI that everyone talks about, this structure of the relationship between user and machine.
And in terms of impact on employees?
No, it’s a little different for us. Like I said, we’re not talking about AI for consumers. So more and more of us are working on developing the intelligence behind our systems.