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In this issue, we talked to Leo Cherman, founder and CEO of Simplypag, a fintech that is offering financial services to people who have non-traditional labor relations, from self-employed to domestic workers, and also solving bureaucracy between employers and these professionals.

Leo, you clearly don’t match that stereotype of a startup founder who dropped out of college to invest in his own business.

Can you tell us a bit about your professional career until you established Simplypag?

I’m a little older than the average startupper in Brazil. I have over 25 years of professional experience working in the financial industry. Before my journey as an entrepreneur, I worked for many years as officer of Citibank, working in the United States, Europe and Israel. I was CEO of Portocred, leading a turnaround of the company and then Head of Sofisa Direto, the first digital bank in Brazil. At the same time, I also worked as an advisor for several companies.

And who was with you in this endeavor?

Besides me, Simplypag was established by two other persons with a lot of experience. Roberto Naddeo, who is our Head of Products, Marketing and Channels today. He worked in several financial institutions, such as Sofisa Direto, Santander and Banco Real, leading digital strategies in these companies. He also has experience with Value Partners, EDS and AgênciaClick.

Our other partner is Rodolfo Penha, Head of Technology. He has a lot of experience in developing solutions for the financial industry. He worked as a software architect for Minuto Seguros, Brazil’s largest auto insurance broker, and as a developer of an automation platform for decision making at TransUnion.

What exactly is Simplypag?

We are a company that seeks to provide financial products to an audience that today is poorly served by banks. We were born to serve almost 40 million Brazilians that do not have access to quality financial services at fair prices because they do not have a traditional labor relationship.

What is your business model? How do you offer credit to them?

We started our operation by first serving domestic workers, who represent a good part of the workforce in Brazil. To reach this audience, we first created a platform aimed at the employer. We do all the labor management of their employees: from the calculation of e-Social to the payment of taxes, including the payroll. The employer pays one single bank slip that we issue with all these costs and we take care of instructing them. Thus, they save time and money. With this control, we were able to offer credit to these workers, something that they hardly obtain in traditional institutions, at a fair cost. The idea is to offer a complete solution to serve both employees and employers.

And is it safe?

Absolutely! The employer not only relies on the ease of these transactions, but also the filing of a series of documents and receipts that he would have to keep for his legal safety. The same is true for the employees, who now have greater clarity about charges and discounts, as well as access to credit itself.

And what is the interest rate? How to guarantee the payment of the installments?

Our rate starts at 3% per month and increases according to the profile of the borrower. Our average ticket is around BRL1,500, an amount that can be paid in up to six or twelve installments depending on the offer channel. As we pay these professionals, we are able to discount the installment from the account on which the professional receives the salary. But even to guarantee the financial health of this professional, we limit the share to 30% of his salary. We understand that this caution is necessary, and we carry out such assertive analysis for our audience.

You mentioned that the product varies according to the channel offered. Are there any channels other than this for the partnership with the employer and the payroll discount?

Yes! We recently created a B2B product and established a partnership with Parafuzo, a startup that connects housekeepers, ironing professionals and furniture assemblers to people who need these services. Professionals are paid via the platform. Thus, we were able to get an idea of the volume usually received by each one, offering them a pre-approved credit according to their profile. This was the first of our partnerships, a natural extension of the domestic worker audience. We are already developing the same service for other platforms that understood the value that this brings to the professional. We will serve from self-employed, delivery workers to private teachers, including electricians, software developers and any professional who uses an application to find customers.

And do you feel that this audience is, in fact, lacking credit?

Sure. Without a payslip, these professionals are unlikely to have credit approved for them by traditional institutions. To give you an idea, our credit proposals have about 40% uptake, that is, acceptance. This is huge and really shows us that this public lacks access to good financial products. No wonder, our churn is very low. Clearly a positive reflection of our customers’ satisfaction.

And do you offer any other services?

We have just created our own checking account, EnConta. It came to meet the demand for credit from domestic employees who have employers not linked to our labor management solutions. Thus, it is enough that the professional receives the salary on this account, so that we can offer them credit according to their profile.

How many people have been served since the beginning of the operation?

There were more than 10,000 leads on all fronts and, since we started offering credit, we have had over 3,000 loan applications. As we are still at the beginning of the operation, we have approved a small fraction of this number. Caution is needed, even so that we can refine our credit assessment models.

And how did Iporanga got into the business?

I know someone who invested in the first Iporanga fund, who ended up introducing me to Guilherme Assis. Soon after I was introduced to Leonardo Teixeira. We got along right away. We started talking about businesses when they were in the process of setting up the second fund and, later, we closed the investment.

And when was that?

In October last year, a pre-seed investment. Iporanga led the investment, which was accompanied by five other angel investors. They are: Sérgio Kulikovsky, serial entrepreneur and founder of several companies, such as Nettrade; Roberto Grossman, CEO of the digital marketing agency FBiz; Júlio Zaguini, former Google executive; Renato Klarnet, founding partner of G5 Advisors; and Claude Ricci, who is a partner at Antler and has more than 40 investments in startups in Brazil and in the Silicon Valley. We are surrounded by a team of exceptional people, super accessible and who have helped us in this entrepreneurship process.

And did the pandemic affect the business?

In the beginning, we had a drop in interest from domestic employees, which ended up impacting our business. On the other hand, this encouraged us to accelerate on other work fronts, such as the B2B platform and the digital account. In the end, it turned out to be positive for the company. We focused on investment and on accelerating these projects, which are extremely sustainable for the medium and long term.

And what is the result of almost one year in operation?

Surely, it was a year of much learning and achievement. So far, our focus has not been to gain traction, but to build the platform, find a product that suits the market and test our business model — which apparently is working quite well. We are consistently dropping our Customer Acquisition Cost and gaining important partnerships, which should further expand our base. We are refining our credit model based on a well-controlled default level. The challenge now is to scale and keep the indicators under control.

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