KFGO, a Midwest radio affiliate, reports on a Reuters announcement that SoftBank Group is taking a position in Mexican Payment company Clip. The exciting news is more about SoftBank than it is about Clip. Softbank is placing $5 billion into the Latin American payments market to invest in high potential credit card and payment companies. After the investment, Clip’s valuation rose to between to between $350 and 400 million.
- SoftBank struck the deal shortly before announcing in March that it would launch the $5 billion Innovation Fund focusing on Latin America.
- Mexican investors hope the fund’s deep pockets will be a gamechanger for young companies that struggle to fundraise locally.
- “Growth will be faster, more dramatic and more competitive,” Fernando Gonzalez, a partner at Virginia-based QED Investors and CEO of Mexican fintech startup Coru, said last week.
Payment technology investments are not limited to Mexico; Softbank took a position in Rappi just last week.
- SoftBank announced a $1 billion investment in Colombian delivery app Rappi last Tuesday, citing the startup’s swift growth as a sign of opportunity in the region.
- But, unlike Asia and the United States, Latin America is a nascent tech market where startups typically have lower valuations and face less competition, meaning even small cash infusions propel growth. In Mexico, startups rarely raise $100 million in a single go.
- Investors see Mexico as an attractive market for fintech because many people do not have bank accounts but have access to mobile phones, said Eric Perez-Grovas, general partner at local investment firm Jaguar Ventures.
According to Crunchbase, Softbank joins other investors in Clip, including American Express Ventures. The Mexican market is undergoing reforms as Banco de Mexico attempts to expand financial inclusion. The central bank already has a domestic card payment scheme in the works entitled CoDI, which will be operated similarly to India’s RuPay and Russia’s Mir Card.
The competition will get hot below the border, that is for sure, particularly as SoftBank, an original investor in Alibaba, invests its Yens into Pesos. But, in a cash-free society, there are no boundaries.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group