Turning deliveries into digital payments, Latin America's Rappi eyes international growth

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On-demand delivery service Rappi is leveraging its huge customer base to provide financial products to Latin American consumers through partnerships and joint ventures with fintechs and banks.

Operating in nine countries and 100 cities, Rappi's 25,000 couriers offer home delivery for everything from groceries, medicines and furniture to cash. Rappi also provides services such as dog-walking and manicures in customers’ homes.

Recent Rappi app upgrades include the launch of Rappi Propio, which enables restaurants to have their own online consumer sales channel, and Rappi Entertainment, which offers streaming music, live events and games. In March 2020, Rappi introduced “cashless zones” in affiliated restaurants and stores in Bogota, Colombia, where RappiPay users can avoid standing in line through QR code payments. Rappi said it wants to introduce this concept in Mexico and Peru.

Rappi’s on-demand delivery services saw steep growth during the lockdown. According to Americas Market Intelligence analyst Lindsay Lehr, usage of Latin American on-demand delivery apps such as Rappi grew 66% year-on-year in March, 165% in April, and 92% in May.

Customers pay for their purchases using their RappiPay digital wallet, which they can fund with debit or credit cards, or by making cash payments to couriers. RappiPay also includes a QR code capability for in-store purchases.

RappiPay has become a platform for launching financial products to Rappi users, who number over 10 million across Latin America, according to research firm Apptopia.

“In each country where it operates, Rappi aims to partner with a bank to offer financial services through its wallet,” said Lariza Galindo, a Latin American digital transformation lead at the International Finance Corporation.

Rappi wants to become a full-fledged financial services app meeting all its users’ needs. Around 70% of Latin America’s 650 million residents are either unbanked or underbanked.

“We’re not just a logistics company, we have a broad vision that includes fintech and banking,” Rappi’s president Sebastian Mejia told Reuters in April 2019 when Rappi received an investment of up to $1 billion from Japan’s SoftBank. Rappi wants to provide unbanked Latin Americans with financial services such as loans and insurance, he said.

In June 2020, Banorte, one of Mexico’s largest banks, signed an agreement with Rappi to launch a financial services joint venture in Mexico, where over half the population is unbanked. Each company will own half of the new business, subject to regulatory approval. Banorte and Rappi intend to create a broad digital financial ecosystem for Rappi users, with a goal of attracting digital-first younger consumers, they said in a statement. The first products are expected to be launched by the end of 2020.

Rappi’s move into financial services mimics Latin American e-commerce marketplace MercadoLibre, which issues Mastercard-branded prepaid cards and associated savings accounts to users of its MercadoPago wallet.

In 2019, Rappi formed a partnership with Visa to issue Visa-branded contactless debit cards to RappiPay wallet users and Visa-branded prepaid cards for Rappi drivers.

Rappi provides Visa-branded debit cards in Brazil, Colombia, and Mexico through partnerships with local banks such as Colombia’s Davivienda and Mexico’s Accendo.

The debit cards, which enable Rappi users to spend funds stored in their RappiPay accounts, are delivered by Rappi couriers, who use a QR code to activate the cards.

“Rappi is transforming the way people shop for goods in Colombia and beyond,” said Arnoldo Reyes, Visa Latin America and Caribbean’s vice president of digital partnerships, fintech and ventures. “We’ve been working with Rappi since its launch in 2015. Our initial collaboration focused on discounts and benefits for Rappi consumers, but we now have a regional partnership, combining RappiPay with issuance of Visa debit and prepaid cards across Latin America. We will continue expanding the solutions we offer with Rappi in order to accelerate digital payments acceptance.”

Visa’s Cybersource subsidiary is working with Rappi to support payments security on its e-commerce platform through Cybersource’s Decision Manager fraud prevention system.

“Visa provides payments and fraud technology support for our core business including the payments flow for our Rappi checkout,” said Mejia. “We handle such a high volume of orders that we need to make almost instant decisions about which payments to approve and which to deny.”

In Colombia, Rappi collaborates with Banco Pichincha, Visa and Latin American fintech NovoPayment to issue Visa prepaid cards to delivery drivers for making purchases on behalf of customers and for receiving their Rappi salaries.

“Working with Banco Pichincha Colombia, we built an instant account origination, just-in-time funding and mass-payout solution for Rappi workers,” said Thomas McAlister, NovoPayment’s SVP regional business development. NovoPayment and Rappi are also using this real-time, API-based platform to issue prepaid cards for Rappi gig workers in Peru, Ecuador, Argentina, Chile and Uruguay with local partners.

In 2019, Rappi and Davivienda launched RappiPay Davivienda in Colombia, based on Davivienda’s DaviPlata mobile wallet, which had 6 million users last year. RappiPay Davivienda offers cash deposits, bill payments, P2P transfers, payments for purchases on Rappi’s platform, and QR code payments at affiliated stores. The wallet has an associated Visa debit card for physical and digital purchases.

NovoPayment provided underlying technology to enable Davivienda and Rappi to issue Visa debit cards in Colombia.

“Rappi wanted to launch its Davivienda digital card quickly, and didn't want to have the hassle of fully integrating with the bank's infrastructure,” said McAlister. “So we rolled out an API-based solution to connect Rappi, Davivienda and Visa. We had to build solutions at speed to match Rappi’s unicorn growth, bridging between an industry disruptor and an established institution.”

Davivienda provided its expertise in managing banking products and services and its risk and fraud models to the partnership, said Carlos Granados Sua, who leads Davivienda’s RappiPay team.

In January 2020, Rappi announced a partnership with Brazilian retail technology vendor Linx, enabling Rappi users to make purchases from physical stores and receive the products at home.

“This type of service is something new for Brazilian retailers,” said Jean Klaumann, Linx Digital’s vice-president. “Linx connects its clients’ stock to the Rappi app, so they can keep selling even with restrictions on people visiting shopping centers. The retailers that have connected to Rappi are already seeing good results. Over 20,000 physical stores located in malls selling items such as fashion, decoration and personal care are supported through our alliance with Rappi.”

In April 2020, Rappi partnered with fintech-as-a-service firm Arcus to add digital financial services to RappiPay such as utility bill payments, instant notifications and scheduled payments, initially in Mexico. RappiPay users will be able to pay bills by credit and debit cards or with cash at payment acceptance locations such as 7-Eleven.

“We’re currently working with Rappi in Mexico, but expansion into other countries is on the horizon,” said Edrizio De La Cruz, Arcus’ CEO.

Given the continuing dominance of cash in Latin America, Rappi recently partnered with regional processor SafetyPay, which provides a cash collection network where Rappi couriers deposit their cash-takings.

Rappi and SafetyPay launched the cash deposit service in March in Brazil and Mexico, and Costa Rica, Ecuador, Peru and Chile will follow later this year.

“The implementation, in the midst of the pandemic, was done quickly and smoothly in six weeks,” said Gustavo Ruiz, SafetyPay’s CEO. “Once the cash is deposited at one of our cash collection points, SafetyPay notifies Rappi of the payment to the merchant and handles the transaction reconciliation.”

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Gig economy Digital payments Latin America Mobile wallets Colombia Mexico Peru
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