Latin American mega-retailer reaches underbanked with cross-brand financing app
Unicomer Group, Latin America’s equivalent of Best Buy, has teamed up with YellowPepper to develop a digital credit app that acts as a financial services center for underbanked and unbanked consumers.
The Emma (Easy Mobile Money Access) app enables customers to apply digitally for multi-purpose installment loans and spend the funds at Unicomer stores and at third-party retailers that accept Emma. Cash loans, bill payments, loyalty programs, digital credit cards, online shopping, and Visa-powered P2P payments are all on Unicomer’s future road map for Emma.
Unicomer sells consumer electronics, furniture and white goods in 24 Latin American and Caribbean countries through its 25 commercial brands. It has 4 million customers, most of whom use installment loans instead of revolving their debt on credit cards, according to Félix Siman, Unicomer’s vice president of innovation.
YellowPepper, a mobile payments fintech based in Miami, provided the technology for Emma, including ID credential scanning, facial recognition, in-store self-checkout and payments.
Using AI-based credit approval technology, Emma allows applicants to make loan applications from home, selecting the amounts, terms and number of installments for their loan repayments. Personalized lines of credit are offered within five minutes and can be used immediately.
Unicomer developed Emma in response to the advent of fintechs providing digital loans.
“We saw more and more fintechs starting to encroach into our markets,” said Siman. “Increasingly, these fintechs are our competitors instead of our traditional retail rivals. We saw an opportunity here, as our traditional competitors weren’t moving as aggressively into the digital loan space and the fintechs were still struggling to understand their customers.”
The advantage that Unicomer claims to have over digital loan startups is its knowledge of its customer base, as 70% of Emma loan applicants already have in-store loans from Unicomer. This means it can offer credit lines that are four to five times higher than the loans provided by fintechs.
“This is a great benefit to merchants,” said Siman. “Digital lenders only give small credit lines to customers since they are new clients. If you as a merchant want customers to buy several thousand dollars of products, the fact that fintechs only give credit lines of $200-$300 isn’t much use.”
Emma acts as a wallet with a contactless QR code capability for in-person payments in brick-and-mortar stores plus the ability to shop online.
“This is a unique partnership between a fintech and a retailer providing installment loans,” said YellowPepper’s CEO, Serge Elkiner. “We’re bringing digital inclusion to Unicomer’s customers.”
Currently, Emma can be used in Unicomer’s 300 Gollo-branded stores in Costa Rica and its Courts-branded stores in Trinidad and Tobago, but Unicomer plans to roll Emma out across all its Latin America and Caribbean retail businesses.
Emma can also be used at 100 third-party merchants in Costa Rica and Trinidad and Tobago that have signed up to accept the payment method, including iShop, a Costa Rican Apple retailer. “We expect several hundred affiliated retailers to be using Emma by the end of 2020,” said Siman.
Like other Latin American retailers, Unicomer has offered installment loans for many years in its stores.
“Previously, there were often delays when customers came into a Unicomer store to apply for installment loans, as they didn’t have their ID documents with them,” said Siman. “Now that we’ve digitalized the process of applying for these loans, instead of bringing their ID documents into one of our stores, they can scan them into Emma at home.”
Siman said Unicomer is one of the first Latin American retailers to deploy technology enabling customers to scan ID documents into a loan app and validate their identity through facial recognition. Emma’s use of biometrics has been one of the biggest advantages to customers, he said.
Since many of Unicomer’s customers are unbanked or underbanked, the majority of the company’s in-store purchases are made with installment loans. “So we’re simply turning an existing credit line into a digital product that can be used in multiple retailers, capitalizing on our customer knowledge,” Siman said.
Emma has helped Unicomer solve the long-standing problem of the large amount of underutilized customer credit on its books. “We give our customers great credit lines, and we have a lot of data on them,” Siman said. “But how many refrigerators or dishwashers can they buy in three or four years using their credit lines?”
An existing way that Unicomer maximizes its existing customers’ underutilized credit lines is to allow them to borrow up to $1,000 in cash at the point of sale in its stores. New customers can also apply for cash loans. Unicomer plans to enable customers to apply digitally for cash loans in Emma and withdraw the cash at any of its own or partners’ stores.
Unicomer decided that for Emma to succeed, it needed to be offered to other retailers. “So we created a network of affiliated merchants where customers can buy products using their Emma credit lines by scanning QR codes,” Siman said.
Emma can also be used for online shopping at Unicomer’s Unicomer.com and Shopcourts.com websites. The plan is to enable third-party merchants to add an Emma purchase button to their websites.
Emma was given a different brand name so it would not compete with Unicomer’s own brands or those of other retailers. Siman said that the strategy has paid off, with the greatest usage of Emma being at Unicomer’s third-party merchant network, which includes competitors who offer the same products as it does, such as iShop.
Unicomer has added 100% touchless scan-pay-go in its Gollo stores to Emma, enabling customers to use the app to scan product barcodes and then self-checkout. “The scan-pay-go feature has had a lot of uptake in our stores, as customers can get in and out of a store very quickly and do their own checkout,” Siman said.
Emma consolidates all a customer’s Unicomer credit lines into one line so they can make a single monthly repayment to reduce their balance and pay off interest. Unicomer plans to add a facility for customers to link their bank accounts to Emma and make automatic repayments.
However, since the majority of customers are unbanked or underbanked, they like to come into a Unicomer store and repay their lines of credit in cash once a month, Siman said.
Unicomer wants to convert all its existing loan customer base to Emma. “In the last few months, we’ve converted 1,300 credit lines to Emma,” said Siman. “By the end of 2020, we’re aiming for 15,000-20,000 Emma credit lines in Costa Rica, with 10% of our customer base there using Emma and 20% by March 2021. We’re now seeing 30% of in-store transactions taking place via Emma in stores that are on board with the app.”