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Tech Roundup: Méliuz draws attention as cashback picks up in Brazil

. Jan 15, 2021
cashback fintech brazil Image: Andrii Zastrozhnov/Shutterstock

You’re reading The Brazilian Report’s weekly tech roundup, a digest of the most important news on technology and innovation in Brazil. This week’s topics: cashback services gain steam in Brazil, state tax disputes harm the ICT sector, and Brazilian startups gain international recognition.

Méliuz draws attention as cashback picks up in Brazil

As e-commerce established itself as a new powerhouse for Brazilian retail, analysts have been searching for even more ways to surf this wave. The latest bet is on cashback services, a segment that has a clear frontrunner: fintech Méliuz.

</p> <ul><li>On January 12, Guide <a href="https://www.oguiafinanceiro.com.br/analises/flash_empresas120121/">became</a> the most recent brokerage to recommend its customers to buy Méliuz&#8217; stocks, with a target price of BRL 30 a share. Ágora and BTG Pactual analysts did the same in December, which helps to explain the company&#8217;s 170-percent gain in stock prices since its November IPO.</li><li>According to Guide, as brick and mortar stores reopen, companies will look for ways to retain their customers on their profitable digital channels — and features such as cashback are a perfect fit for this purpose.&nbsp;</li></ul> <p><strong>Why Méliuz?</strong> Founded in 2011 and the only company in the sector to go public, Méliuz is riding solo on Brazil&#8217;s cashback wave, according to analysts.&nbsp;</p> <ul><li>Besides its position as market leader, Méliuz boasts impressive figures. In its Q4 operational report, Méliuz reported that its total number of users reached 5.3 million — 152 percent growth on 2019 levels — while the Gross Merchandise Volume (or the total value of products sold on the platform) reached BRL 2.5 billion in 2020, 51 percent more than 2019.&nbsp;</li><li>Another strong suit is the company&#8217;s credit card, which offers cashback on every purchase. The product topped 2.8 million requests last year. For comparison, Banco Inter&#8217;s own credit card registered 2.5 million requests by the third quarter.</li><li>In a December report, BTG Pactual analysts highlighted that Méliuz has interesting growth perspectives on its own, but could also become a very attractive acquisition target for bigger groups such as Nubank and Banco Inter.</li></ul> <p><strong>Risks and competition.</strong> Competitors are becoming increasingly innovative with cashback features, particularly &#8220;super apps&#8221; such as retailer Magazine Luiza&#8217;s, which can pose a threat to Méliuz as a standalone company. This creativity is also widespread in the financial sector.&nbsp;</p> <ul><li>Last week, digital bank Zro Bank<a href="https://valorinveste.globo.com/mercados/cripto/noticia/2021/01/05/banco-digital-lanca-cartao-com-cashback-em-bitcoin.ghtml"> launched</a> a credit card that offers 0.5 percent cashback to be paid in bitcoins, reportedly the first of its kind in the country. Cashback is also being used as a competitive edge: when announcing its new Rappi Bank service, delivery app Rappi <a href="https://oglobo.globo.com/economia/rappi-lanca-banco-digital-com-cartao-de-credito-emprestimo-para-negocios-parceiros-24830778">said</a> the product will provide a credit card that offers higher percentages of cashback for purchases made through its app.&nbsp;</li></ul> <hr class="wp-block-separator"/> <h2>State tax controversy stirs ICT sector once more</h2> <p>The Information and Communication Technology (ICT) sector became the latest to join the backlash against tax increases proposed in São Paulo state, as part of Governor João Doria&#8217;s BRL 7 billion cost-cutting plan. Organizations warn of falling tax revenues, R&amp;D investment, and job cuts.&nbsp;</p> <p><strong>Consequences. </strong>The national electronic manufacturers association Abinee <a href="https://drive.google.com/file/d/1MaY88IgDNMOfP5eCYtjRNnfNnQSy75_1/view">warns</a> that São Paulo — home to 75 percent of the sector’s income and 80 percent of all R&amp;D investment — will be less competitive with its peers in Amazonas and may suffer job losses, in particular in cities such as Campinas and Jundiaí.&nbsp;</p> <ul><li>According to calculations from industry association Fiesp, over 50 electronic products will suffer 4.4-percent price <a href="https://tecnoblog.net/401595/aumento-do-icms-em-sp-e-criticado-por-setores-de-software-e-eletronicos/">increases</a> in the state.&nbsp;</li><li>Other sectors warn of the toll it will take on consumers. Pay-TV association ABTA <a href="https://www.telesintese.com.br/elevacao-do-icms-em-sp-resultara-em-reajuste-de-4-nos-planos-de-tv-paga/">says</a> its services will become 4 percent more expensive. As a result, they expect that over a million customers in São Paulo will cancel their subscriptions.&nbsp;&nbsp;</li></ul> <p><strong>More legal battles to come. </strong>State goods and services tax (ICMS) on software would also increase from 5 percent to 7.9 percent, rekindling a legal battle the sector believed to have put to bed. Last year, the Supreme Court decided that software should not be subject to ICMS, which sector association Abes <a href="https://www.convergenciadigital.com.br/cgi/cgilua.exe/sys/start.htm?UserActiveTemplate=site&amp;infoid=55848&amp;sid=5">believes</a> makes the decree invalid for software manufacturers.&nbsp;</p> <ul><li>Abes is not the only one to question the decree. Industry federation Fiesp has challenged the decision in court.&nbsp;</li></ul> <p><strong>Why it matters. </strong>The case is yet another example of how Brazil&#8217;s overly complex tax system creates a burden for business. It is unlikely that these problems can be solved without a sweeping tax reform, but such a proposal has not been a priority for the Jair Bolsonaro government.&nbsp;</p> <hr class="wp-block-separator"/> <h2>Brazilian startups gain international recognition with UN award</h2> <p>Two Brazilian startups were chosen as part of a group of 40 winners of the 2020 edition of the United Nation’s WSA Award. The prize focuses on promoting local digital innovations that relate to the United Nations Sustainable Development Goals and may lead to positive impact in society. The WSA Winners of 2020 will present their innovations and receive their awards at the <a href="https://wsa-global.org/wsa-global-congress-2021/">WSA Global Congress 2021</a>, to be held on March 22-24.&nbsp;</p> <p><strong>The winners.</strong> This year, Brazilian startups GreenPlat and Healthtech Phelcom snapped two spots on the podium. GreenPlat offers software solutions for companies to track their production chains and manage their waste in an eco-friendly manner using technologies such as blockchain. Meanwhile, Phelcom is responsible for developing Eyer, a portable retinal camera that can be attached to a smartphone, expanding access to eye care. With it, it is possible to diagnose diseases that can cause blindness, such as glaucoma and age-related macular degeneration.</p> <ul><li>After the announcement, CEO José Augusto Stuchi told <strong>The Brazilian Report</strong> that Phelcom saw an increase in demand for its solutions. The company aims to increase its team by 50 percent this year to manage newly-launched operations in the U.S. and support an expansion to other Latin American markets. The company is also preparing a new fundraising round and “is looking for an investor who is aligned with our growth strategy,” said Mr. Stuchi.&nbsp;</li></ul> <p><strong>Latin American presence.</strong> Beside’s Green Plat and Phelcom Eyer, three Chilean startups and three Mexican solutions also featured on the winner’s list.&nbsp;</p> <hr class="wp-block-separator"/> <h2>Take note&nbsp;</h2> <ul><li><strong>Smartphones</strong>. Chinese smartphone maker Realme <a href="https://link.estadao.com.br/noticias/gadget,fabricante-chinesa-realme-chega-ao-brasil-com-celulares-de-ate-r-2-8-mil,70003573805">debuted</a> in Brazil this week, with sales kicking off on January 14 in partnership with online retailers Submarino and Americanas. Model prices range from BRL 2,300 to BRL 2,800 (between USD 437 and USD 532) and appeal to younger consumers. According to newspaper O Estado de S. Paulo, the company wants to bring other products into the country — such as smart home appliances — and aims to be featured among the top brands in the local smartphone market by 2025. </li><li><strong>Fundraising.</strong> Fintech Contabilizei became the <a href="https://startupi.com.br/2021/01/startup-contabilizei-recebe-aporte-liderado-pelo-softbank/">newest addition</a> to Softbank’s portfolio of Latin American startups, which already includes investment in startups QuintoAndar, fintech Creditas, and Brazil’s latest unicorn, decor e-commerce MadeiraMadeira. The amount raised in the Series C round was not disclosed, but the company aims to use it to attract more customers. Contabilizei provides accounting services for individual entrepreneurs and small companies and has been surfing the entrepreneurship boom in Brazil, reaching 30,000 customers by the end of 2020.  </li><li><strong>IPO.</strong>  Decor e-commerce Mobly — a local branch of German firm House24 — <a href="https://valor.globo.com/financas/noticia/2021/01/14/ipo-da-mobly-deve-ser-precificado-no-dia-3-de-fevereiro.ghtml">established</a> the price range for its IPO at between BRL 17 and BRL 23.50. The pricing is scheduled for February 3 and the company could raise around BRL 782 million by going public in Brazil. However, this may rise to BRL 900 million if a supplementary batch of shares is offered. The company aims to use the resources to beef up its finances and invest in marketing and physical assets, such as new stores and distribution centers.  </li><li><strong>Legal questions.</strong> Algar Telecom <a href="https://www.mobiletime.com.br/noticias/13/01/2021/algar-pede-ao-cade-suspensao-do-leilao-da-compra-da-oi-movel/">filed a complaint</a> with antitrust regulator Cade against competitors TIM, Claro and Vivo over their purchase of Oi’s mobile telephony assets for BRL 16.6 billion. Algar asked Cade to suspend the auction, claiming the companies formed a consortium that acted as a monopoly. </li><li><strong>Acquisitions</strong>. After losing Linx in a cut-throat competition with PagSeguro last year, software provider Totvs has turned its eyes to digital marketing startup RD. This time, the company is battling against website hosting service Locaweb, which is also interested in acquiring the asset. <a href="https://www.google.com/amp/s/www.moneytimes.com.br/totvs-confirma-interesse-em-empresa-de-marketing-tambem-visada-pela-locaweb/amp/">Negotiations</a> are private, but according to the press, Totvs may have to spend up to BRL 1 billion to afford the transaction.

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Natália Scalzaretto

Natália Scalzaretto has worked for companies such as Santander Brasil and Reuters, where she covered news ranging from commodities to technology. Before joining The Brazilian Report, she worked as an editor for Trading News, the information division from the TradersClub investor community.

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