Qpagos: A New Name In Fintech

There are lots of entrepreneurs situations these days for investors to choose from.  QPAGOS (QPAG, $0.21: OTC) is a company a little further along the curve with approximately $3.5+ million in revenues.

QPAGOS (translation: Q Payments) is a virtual bank serving  Mexico where they offer an integrated network of kiosks and terminals totaling more than 700.  This enables customers to deposit money to pay for goods and services like rent, utility bills etc. Payments can be made at the kiosks or by mobile phone.  This represents a valuable convenience in a country where most people have bills to pay but don’t have a bank account.

The company is dedicated to growing its network of kiosks virtually everywhere in Mexico while adding new features such as micro loans.  QPAGOS earns it way by charging fees. We were hard pressed to find an exact percent but we suspect transaction fees are well in excess of 5%.

Here is what makes their business model so interesting.

Mexico: The Promised Land For Payment Processing

Having heard about QPAGOS,  I decided to check out Mexico for myself.  It was time to say goodbye to overcrowded freeways, overpriced rents and Taco Bell. I wanted a real enchilada.  

Inspiration comes from the legendary investor Jim Rogers who is known to have circled the globe on his Harley Davidson looking for interesting investment opportunities.

I don’t own a Harley and stopped making investment recommendations long ago.  But that doesn’t take any of the fun out of the adventure.  So off I went on the journey.

The first stop was the beautiful Mexican seaside town of Puerto Vallarta along the Pacific Ocean.  In less than 24 hours after arriving, I discovered something rather amazing: no acceptas la tarjetta de credito!   What do you mean no credit cards?

After some reading I discovered the vast majority of Mexican business transactions, including restaurants, supermarkets and other stores are made in cash.  Official figures put to total as high as 95%.  Check out the World Bank and they claim that nearly two-thirds of the Mexican population doesn’t even have a bank account.

For the average observer, this may not be a surprise.  After all, Mexico has a huge percentage of poor citizens, wages are extremely low and there is only a small segment that are in the middle-income.

Inspiration from Nairobi

But then I was reminded of Kenya and the success of M-Pesa, the mobile money transfer business that was the focus of a 60 Minutes piece in 2016 titled “the future of money”.

The report claims that virtually everyone in Kenya has a mobile phone and this enables them to download M-Pesa and transfer money to pay rent, utilities, or anything else where the recipient has an M-Pesa account.

Mexicans are Mobile Too

According to the market research firm Statista, Mexico will have exactly 86.3 million mobile phone users this year and the figure continues to rise.  There are about 120 million in the population so the user population is about two-thirds.

This matches the number of unbanked citizens. So if M-Pesa can work in a country even more impoverished and under banked, why can’t it work in Mexico?

QPAGOS is Making Noise

Well perhaps Mexico is getting the message. According to Reuters QPAGOS was incorporated on September 25, 2013.  It appears they are using pretty much the same business model of M-Pesa.

The Company’s Payment Gateway connects service providers and their clients through Qpagos Corporation’s technology and processing system. Its RG Processing is a platform designed for processing payments collected through various devices and interfaces, such as self-service kiosks, windows (WIN) terminals, Java terminals and extensible markup language (XML) terminals. RG Processing controls various financial operations, provides monitoring services and accumulates statistics.

Competition from Traditional Sources

QPAGOS competitors include Wal-Mart, Soriana, Chedraui, OXXO and 7-Eleven.  No doubt formidable players but then the potential is so large, it hardly matters. Besides, most of these are fixed locations rather than mobile.

QPAGOS is getting some solid revenue traction. Through the first nine months of 2017 revenues totaled $2.9 million 43% ahead year earlier levels.   For all of 2016 QPAGOS generated $27 million.  The leadership is in the hands of 69-year-old Gaston Pereira who has been with the company since the beginning.  Senior Pereira’s bio in the payments world of Mexico is lengthy.

We surmise some sort of IPO or reverse merger was accomplished as the stock of QPAGOS is quoted in the pink sheets.  When last we looked it was trading around $0.20 per share.

On the US side of the great wall of Mexico, the world is watching as cryptocurrencies threaten the status quo.  On the other side, there are enough opportunities in fintech it would make Jim Rogers get off his Harley and take notice.  QPAGOS is one with a big upside if management can keep the company moving forward.  By the way for those Harley owners traveling to Africa, M-Pesa is listed on the Nairobi exchange.

Featured image courtesy of Shutterstock.

James Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.