Boston-based “fintech” startup Airfox is being purchased by Via Varejo, the biggest retailer in Brazil, in a bid to offer banking services to millions of Brazilians who lack traditional bank accounts.
Airfox first partnered with Via Varejo in 2018 to launch banQi, a “neobank” app that lets Brazilians make purchases or transfer money using their smartphones. banQi users can also make financial transactions at any of Via Varejo’s hundreds of brick-and-mortar retail stores throughout Brazil. By acquiring Airfox, Via Varejo is moving beyond retail to become a provider of consumer financial services.
Financial details of the transaction were not disclosed. Airfox, which employs about 35, will continue to operate in Boston.
Digital alternatives to traditional banks have been on the rise worldwide. In the US, Varo, Empower and Chime have attracted millions of depositors. But the biggest growth opportunity for digital banks may be in the developing world, where millions have never done business with old-school banks and are open to alternatives. M-Pesa is popular in African countries to make purchases and pay bills by phone.
Airfox founder Victor Santos thinks his native Brazil is an ideal market for mobile phone banking. For one thing, 40 percent of the population have no bank accounts, he said, and bank loans are costly.
“The poorer you are,” Santos said, “the more you have to pay.” For instance, he said credit cards often charge eight to 10 percent a month, while Banqi users pay three to five percent per month.
Founded in California in 2015, Airfox relocated to Boston in the following year. Despite its focus on serving the Brazilian market, Santos said the company was set up in the US because he wants to grow quickly, and the US has a much larger pool of the highly-skilled data scientists his company needs. “You just can’t find the level of talent for what we’re doing in Brazil that fast," Santos said.
Peter Wannemacher, digital banking analyst at research firm Forrester, said that the acquisition comes at an opportune time for Airfox, because venture investment in fintech companies had begun to taper off even before the COVID-19 epidemic threw the planet into recession.
Meanwhile, companies such as Via Varejo, with money to spend, can scoop up valuable assets at low prices. “Now is a good time to buy companies if you have cash," Wannemacher said.