Innovation

A mobile wallet service is a virtual wallet that can be used by an application in intelligent devices to store information on money deposited, and thus enable the users to send and receive money using a cell phone. This app is different from "mobile payment" apps insofar as they do not necessarily have to be linked to a bank account. In principle, it works in a similar way to debit or credit cards. Here, however, the information is stored in the smartphone or in the cloud rather than a plastic chip. Additionally, the communication between the devices is wireless. In Latin America, this technology has been gradually implemented since 2012 and its use has increased, with the aim of connecting a greater share of the workforce to the banking system.

TPAGA Wallet can be used to pay for fuel, shoes, public services, or recharging a cell phone.

According to Freddy Parra, Financial Director of TPAGA "what we are doing is something rare. Our product is an electronic wallet that, through cell phones and smartphones, can be used to store money or credit cards. Credit to make payments, that is something that is being done in various parts of the world. However, what we are doing is very focused on the local market, so what we do to make this an accepted product is to bring good practices that have been made in other countries and try to implement them here."

According to the World Bank’s 2017 Financial Inclusion Report, in Colombia there are approximately 6.7 million adults who still do not have access to the financial system. Residents of rural areas are especially likely to be unbanked. The access gap between cities and rural areas is pronounced. In urban areas the inclusion indicator is 87.2%. In rural and scattered rural areas it is 65.1% and 54.7%, respectively. The objective of TPAGA is to allow financial inclusion through process optimization, cost reduction and better in the customer experience.

Inspiration

As Freddy Parra tells the story "this idea came 3 years ago as a result of a problem that the founders of TPAGA were having; and it is with another enterprise called, TAPPSI,* where, during this time, other companies began to arrive, which through applications, offered services to reserve a vehicle and offered their users or passengers the possibility of paying by credit card with a very comfortable and very pleasant experience. From this arose the need to create their own product. They tried other suppliers, but when they did not find the solution that was required, they decided to develop TPAGA as a payment platform."

Andrew Gutierrez ( Founder of TPAGA) tells it like this: "Billetera TPAGA was born as a solution to the need to transfer the money from their taxi careers to their 50,000 taxi drivers. Initially, no alternative was viable since it was an unbanked public. And for those who do have a bank account, the cost of making interbank transfers was very high." Because of this, the taxi drivers could not receive the payments made to them by transfer because there was nowhere to deposit the money; it was from this problem that the TPAGA mobile wallet arose.

Transactions performed with the mobile wallet have no cost. That makes TPAGA different from alternative mobile banking services.

*Tappsi was a mobile application created in Colombia for cell phones that allowed asking for a taxi associated with that company.

Overall impact

Freddy Parra describes the overall impact of the innovation as such:

"There are many people who have problems when carrying cash; carrying cash can mean a problem because you are exposed to risks in the street. You expose yourself to mismanagement of your money. You expose yourself to not have the your money with you when you need it… … [or] of having to pay a public receipt when you do not have a bank account or you are not very familiar with the processes of the banks.

You prefer to go to an office directly or to a reception center of payments which is a waste of time; you are stopping doing other things. We are initially focusing on unbanked people. However, there are also people who are banked, who have started to like the product. Initially, [we served those who were] unbanked due to [lack of] financial inclusion.

We want to ease the way to something that is coming, the end of paper money. That does not mean that the currency ceases to exist, but simply that we change from paper to an electronic currency… ...TPAGA can be that means that facilitates [that]... …[our clients are] counting on their money where and when they need it, to administer it better and exposing themselves to fewer risks."

Co-Founder Juan Salcedo says "After being selected by Y Combinator, an acclaimed Silicon Valley fund and startup accelerator, for investment we identified the immense potential of the TPAGA Billetera product, focusing this solution on unbanked communities." TPAGA is still in its expansionary phase. As the CFO puts it "in the short, term there is much to be done." Month over month TPAGA’s user base is growing by a whopping 40%. In the long term TPAGA will be Colombians wallet in every aspect.

"We also realized that banks do not have information about the income or expenses of the unbanked, so they can never give them loans,” Gutierrez says.

"With TPAGA, I will be able to show you that there are a million people who earn 200 thousand pesos [about 60 USD] per day. We can offer you a microproduct. There is a large market for this type of product in Colombia. According to the World Bank, 30 million (out of 50 million) of Colombians do not have banking services. 90% of consumer transactions in Latin America are made in cash because this population did not have the opportunity to receive money electronically, until now."

This is how TPAGA contributes to UN Sustainable Development Goal 1, No Poverty. 69% of adults today have a bank account or other provider of mobile money, which is a crucial step to escape poverty. It is an improvement compared to 62% and 51% in 2014 and 2011 respectively. According to the Global Findex database, between 2014 and 2017, 515 million adults opened accounts, and 1.2 billion have done so since 2011. While the number of account holders has increased considerably in some economies, in others progress has been slower, often with large disparities between men and women and between rich and poor.

TPAGA also facilitates Goal 9, Industry, Innovation and Infrastructure. The company seeks to use technology to solve the challenge of disparities in financial system access. Access to the financial system also helps to achieve Goal 10, Reduced Inequalities.

Business benefit

TPAGA is still in its growth phase. "Month by month it’s growing around 40% in users,” the company’s CFO puts it.

Co-founder Juan Salcedo says, “After being selected and invested in by Y Combinator, a recognized fund and an accelerator of new companies in Silicon Valley, we identified an immense potential of the TPAGA Billetera product, focusing this solution on the unbanked communities."

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Social and environmental benefit

This innovation benefits society insofar as it provides a way for people who are not otherwise included in a financial system access to it. This allows greater freedom, lower costs, better experience, more savings opportunities and greater freedom of movement. A housewife, a worker, a taxi driver, a stylist, a farmer, a merchant, or an entrepreneur will find in TPAGA financial and economic empowerment without having to belong to a Bank.

TPAGA will also benefit the natural environment by reducing the need for paper in the retail finance industry.

Interview

FREDY PARRA HERNANDEZ, Financial Director

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