The Software Agents: Episode 11 - Zippi - Ludmila Schincariol Pontremolez, CTO - Software Powered Credit For Brazil’s Gig Workers

Zippi gives gig workers in Brazil a way to make ends meet without being sucked into snowballing debt. One missed payment and they’re barred from the financial system. CTO Ludmila Pontremolez explains how software made it possible to provide working people with a stable financial base that the credit industry isn’t built to deliver.

Announcer: Welcome to The Software Agents. Meet the people who bring software to every aspect of life, society, and business to handle the challenges of a transforming world.

Christina Noren: Welcome to The Software Agents, a new podcast on how software is helping the world survive and evolve right now, as told by the people who are making it happen. I'm Christina Noren, and my co-host is Paul Boutin.

Paul Boutin: Hello. Thanks for tuning in.

Christina Noren: The Software Agents is sponsored by CloudBees, the enterprise software delivery company. CloudBees provides the industry’s leading DevOps technology platform that enables developers to focus on what they do best—build stuff that matters.

And we have a guest today who is definitely building stuff that matters. Please welcome Mila Pontremolez who is in, who is in Brazil leading a company called Zippi that is providing banking for gig economy workers in Brazil and I think maybe beyond. Tell us a little bit about yourself and what you're doing with Zippi.

Mila Pontremolez: Hi, Christina. Hi, Paul. Thank you for having to me. So, today at Zippi, we're building a platform, a banking platform for gig workers. And gig workers have—they represent a big chunk of the working force in Brazil. It’s a total of 34,000,000 people today.

The way gig workers are different than formal workers is that they have really high income volatility. They in general are underserved by the big financial institutions, and they completely lack financial safety nets. So, there’s no public pension or health care or emergency funds for them.

So, we are building products that are suitable just for them, and like no other player is doing right now in Brazil.

Christina Noren: So, tell us how you came to do this. I mean, my understanding is you are Brazilian and you spent time in the U.S. as a software engineer—so, tell us a little about your journey, here.

Mila Pontremolez: I am a computer engineer by trade. I studied here in Brazil, and after graduating, I moved to the U.S., first to be an entrepreneur with a friend that also went to college with me who had a startup that was a directory for day cares and preschools, and we had a lot of fun doing that. We were accelerated by 500 Startups, so we had a good run.

But after that, I moved on to Square, where I really got the passion for fintechs and the economic empowerment that comes with them. So, at Square, we're really focused on the little guy, on the small business owner that doesn’t have that many financial services available, and I saw all the constructive power that it had in their lives and how it helped them to actually be able to focus on their businesses and not on the complicated finances and the hidden fees.

So, after two years and a half at Square and a total of five years in Silicon Valley, I decided to come back to Brazil because we had bigger problems awaiting. And I already had a big passion for the small business owner or the independent worker, and they are massively underserved in Brazil. We have a big challenge with credit because of how the credit bureaus are set up. Here, we don’t have—we are starting to have some sort of positive credit scoring, but it’s generally just blacklisting. So, if you're ever late to a bill, you become blacklisted for the next five years. So, that leaves a lot of good people out of the system. Yeah, and it’s very unfortunate, because it can be a $7.00 bill that you left four years ago, and that will completely constrain your capability of getting credit in the market, so a lot of people are left out. And for those small business owners, that becomes a big impediment for them doing business.

Christina Noren: So, I didn't know that. I mean, I know a lot about the history of debt in the Western world and one of my favorite authors is David Graeber, the anarchist anthropologist, and his book on debt. But I didn't realize, in our modern world, that in Brazil, one of the largest economies in the world, that there’s that kind of credit system.

Mila Pontremolez: Yeah, actually, this is—it is prevailing. It is how most banks are doing their credit scoring. And of course, the banks have the advantage of having their own historical data to assess for credit, but for the new person coming in, if you ever make a default, then you're out.

So, there is a new bureau coming out that has positive scoring, and we were their first clients, actually, in Brazil. Zippi was the first client of the positive bureau. [Laughter]

Christina Noren: So, let’s talk about what Zippi is and how it works and let’s go from how it seems to a customer who is amongst these underbanked and then what’s going on technologically behind the scenes.

Mila Pontremolez: The product that we are building now, and we already have a small-scale pilot, but we're scaling, is a credit card that is weekly. So, it’s meant to cover the weekly costs for working expenses. So, every—it’s low limit and high frequency, and it is very affordable compared to the other lines. Because what happens with the blacklisted population is, if they do get credit, it is very expensive. So, our line is affordable, and the way that we do that is, by having a low weekly limit, we can disburse, like, have an overall monthly limit that is high value, but the client is only exposed to a small risk.

So, imagine we can give them 250 reais which is $60.00, 250 reais weekly limit, and that’s 1,000 reais monthly limit. But they're only at risk of defaulting over 250 reais. So, that’s really good for the customer, because it avoids snowballing. So, if they don’t pay, if they don’t have money for that week because their life is so unpredictable, we just lock that card and temporarily block and put them in a low interest installment plan that is also weekly so that they can quickly come back and, after two or three weeks, they're normally back to using the product again, and that’s great.

Imagine the street food sellers that can now, instead of having to do several small purchases during the week, they can go to the supermarket once and get all the food they need for the week. So, it adds a lot of flexibility and control to their lives.

Christina Noren: The interesting part of this in terms of where we are in the world today is, what you're describing might have been something that someone would have come up with, you know, 10, 15 years ago from a more philanthropic sort of business infrastructure side. But you're a software business, you're a software engineer. So, what makes this a software problem today?

Mila Pontremolez: Yeah, so, the big thing that we had to solve for is how to create a credit card processor that can accommodate or highly customizable rules and a completely different playbook. So, our big challenge with this population is, we want to give them credit in a healthy way, and the way that we do that is trying to combine—trying to understand how credit is being used for their business expenses. And then potentially allowing a higher credit usage for that specific category.

So, if you have a mechanic repair shop, I have a processor, so I can trigger—when I see transactions coming through that are for purchases pertaining to your working area, I can give you a different limit for those types of transactions. So, even for the very high risk population, I can have high credit limits for specific usage, and we achieve that building our own processing back end.

Christina Noren: Interesting. So, that’s really unlike anything I'm aware of in the credit card world today, which is, it’s no different than making a $500.00 purchase for supplies at a food supply place or a $500.00 purchase of shoes at Barney’s.

Mila Pontremolez: Yeah. Really, a bit of history on Zippi—before, we used to have, our first product was a weekly loan product, and the repayments were weekly. But we noticed exactly that, that we didn't have any guarantee that the money was being put to good use in purchases that would actually drive their businesses.

So, with a credit card, you have a very healthy view of how they're using their money, and if they're using it, how—in ways that will actually generate more money for themselves.

Christina Noren: So, how are you financing this? Because most software startups have an element of financing, you know, financing the actual development of software, which is getting lower cost with time, but you're actually having to float money to your customers. And so, there’s—you know, you kind of are duly a fintech startup and a tech startup.

Mila Pontremolez: We are. We have a whole funding infrastructure where we collect—now we use the ventures to get money from the financial markets and bring this to this operation, which is, it’s a very capital intensive operation.

Now, another source—so, we have, venture capitalists funded us to pay salaries and everything else. But for the financing piece, we use another financing vehicle that’s called The Ventures.

Christina Noren: You'll have to spell that for me so I can look it up.

Mila Pontremolez: Actually, I don't know if I'm saying it right in English, but I think that’s what it is. [Laughter]

Christina Noren: When did you get this started and when were you first able to offer the credit cards to your customers?

Mila Pontremolez: We started Zippi over a year ago. We were accelerated by Y Combinator, actually, last summer, and the product that we had at that time was the weekly loan. And it was a good product, but we wanted—we didn't have any guarantee of how the money was being used, and that left us very uncomfortable.

So, we wanted a product that actually solved our clients’ problems and that was more tangible. So, in January of this year, we started to think of this credit card and I think in February, we already had the first live version out, which was extremely fast. We built our whole billing infrastructure, our whole payment reconciliation infrastructure. We built interfaces with WhatsApp because that’s the channel that our customers like to use. So, they would receive their bill directly in WhatsApp and let us know what they paid.

So, it was super-fast and crazy, but as soon as we noticed that customers were really getting value out of it, we decided to expand further.

Christina Noren: So, I wanna step back for a second. So, you know, so you started with this short-term loan product and you pivoted—I do hate the word pivot, but I'm gonna use it anyway—but you pivoted to this weekly credit card concept. So, you know, so how is your team organized and how were you able to make that shift, and how do you actually deliver software?

Mila Pontremolez: Yeah, so, we—when we put it out, we left the…because we already had, we had loan customers, so people that were paying. We still have, to this day, people that are paying their loans. So, we left everything on autopilot on the one side. So, we created, we used—sorry, stacked, to be more specific. We used Ruby on Rails, and we have a React front end, and we use Heroku.

So, we left everything, all the process is automated, so the customers get notified online and we reconcile the payments automatically. So, we could put that product from the engineering side, completely on the side, so we could focus on building the new pilot. And we built this pilot with a team of three engineers. Some of us, two of us were building the back end and one was building the front end. Every one is actually pretty full stack, but sometimes leaning towards the things that we like the most.

But we were—we had a very light suite of tests for the very critical actions. For example, we built all the financial calculations for the financing of the credit card debt and for the rotative credit lines and all the billing. Everything was built, all those very critical things, we used automated tests that ran in a CI environment, but the rest, it was the team queuing a lot and going after it.

Yeah, everything runs on Ruby on Rails, our whole back end. So, we have Sidekiq workers that do all the asynchronous jobs. So, when a payment comes in through the webhooks, we call the WhatsApp API that puts it on a Sidekiq queue and then we get a printout. Everything is super scrappy, actually. Now, we are refactoring it using the concepts of Rails engines, where you can—it’s still a monolith, but you can compartmentalize in different areas and create clear boundaries between the code areas.

But for this pilot, it was all within this monolith that we had a staging—we had, of course, the staging environment in our production and we did automatic deploy staging and twice a day, we would deploy to production by hand. So, we would make sure that we had time to QA before we went live.

Christina Noren: You know, you mentioned it’s a monolith, I think that’s an interesting thing, because I think we have these idealized ideas of architectures and sometimes they're not the best way to ship something in two weeks. But do you see that evolving? I know you talk about manual deployment for security—do you see more automation as you go from a sort of early product to something more long-term stable?

Mila Pontremolez: Yeah, no, absolutely. Before this pilot, we didn't even have a CI automated testing and staging setup. So, this was a need that arose during this process of the pilot, but now we are creating stuff that’s much sturdier, because as with the new rules that are coming into place, we actually cannot humanly test everything. So, the new concepts that we're bringing in is, we are—also, we're building a Flutter app, so that will have some tests on it, too, but that’s a completely different deployment stack. But for the rest of the app, we'll still continue to use Heroku.

Christina Noren: You started this pivot towards the credit card versus the short term loan for various business reasons that were arising earlier in the year. And, you know, you're now, like we are in the United States, we're living in two countries that have been the most significantly impacted by COVID and the pandemic. Have you seen any impact on your customers or their needs or your own ability to develop and meet their needs?

Mila Pontremolez: Yeah, that’s pretty interesting. The COVID crisis hit when we were four weeks into our pilot, and we were—I think, six weeks, maybe, yeah. And we were wondering, like, how is this gonna impact? What’s gonna happen to the client usage, how it’s gonna impact our ability to attract customers. And what we noticed with our populations, that transaction value, it decreased a little bit, but these workers, they were—and we interviewed a lot of people to understand what was, how was their life changing. And what we noticed was, those people were hustling. People were finding ways. Maybe they were displaced from their normal job and now they're working the gig economy, or maybe they were working several different occupations that were not their primary occupation, but that, because that was no longer an option.

So, what we saw in our clients is, people did not stop working, and many of our clients reported, “I only got food on the table in certain weeks because of your guys’ card because I wasn’t able to get a reliable income every week.” So, that was really fulfilling for us to hear.

And what happened in Brazil is, a lot of people got laid off, and a lot of people got less working hours and decreasing wages as well. So, that brings more people into the gig economy. What we're seeing is more people cooking and selling, like, making cakes and selling beauty products door by door. So, we expect to see even more users and more clients being able to benefit from our card in the situation.

Christina Noren: So, that brings me to my next line of questioning, which is, fortunately or unfortunately, what you're describing for the gig economy in Brazil is something we're seeing in supposedly more developed economies, but that’s all relative. I'm sitting here in downtown Los Angeles and I'm seeing what you're describing. I'm seeing a lot of people shifting to cooking and serving food on the streets who have obviously been displaced from other jobs at this time and, you know, it’s just an acceleration.

So, do you see what you're doing being a model beyond Brazil and do you see Zippi itself expanding beyond Brazil?

Mila Pontremolez: Absolutely. Expanding financial services is always hard, because it’s a heavily regulated space. But every time we talk to founders and friends abroad, people describe feeling the same pain, sort of pain, and we have absolutely every ambition to go to Latin America next, other countries that are—that have a similar credit scoring system and that have a similar, very large mass of people working in the informal economy.

Christina Noren: Yeah. Well, and it’s also funny. I know I'm thinking back to earlier in this conversation, this whole, you know, you're behind on a $7.00 bill and you're basically blacklisted.

Mila Pontremolez: Right.

Christina Noren: And we're, you know, talking so much in the English-speaking countries about cancel culture right now and we're worried about, you know, high paying execs being canceled for whatever one transgression. But you're talking about people on the ground who are being canceled out of the financial system because they had one bad week.

Mila Pontremolez: Exactly, yeah, yeah. And that completely changes, actually, their possibilities to provide for their families and even—it’s a life of making constant tradeoffs of what bill you wanna pay. Is it utilities, is it some banking, is it rent? We see our clients juggling a lot, and their lives overall become really stressful and emotionally loaded with all those financial stresses. And it really ________ people’s abilities to live a prosperous life and a happy life.

And this is our goal with the company is that, empowering workers to live a prosperous life without financial or emotional tradeoffs.

Christina Noren: Yeah. I mean, for me, it’s very powerful and without going into too much detail, it’s like, neither Paul nor I grew up very wealthy and there were times I didn't get to eat as a child, and my mother was always employed in the informal economy. So, you know, I just want to tell you, it’s a very powerful thing that you're telling me.

I am curious just, you know, you and your team in general, like, how much of this is driven by any of your own experiences or family or—you know, it’s like, where does the passion for this come from?

Mila Pontremolez: To be completely honest, I developed a passion for this problem working at Square at the time. And I think what my co-founders and I, we have spent most of our year this year talking to people. We had weeks where we had over 20 customers coming in, and that’s how we really understood what issues they were going through.

And it’s an empathy exercise. Every client that would come in, we would be exposed to a completely different way of living and types of problems. And today, we have a—we're always, of course, still learning, but I think we were able to understand the gig workers in a way that no one else in our industry has. And it really gives us the ability to build products that are perfectly made for them. We always say that, we don’t necessarily—we don’t invest in financial education so much, but we believe in building products that empowers our customers to make smarter financial decisions without having to think about it.

So, we try to get into their heads and understand how they already think and how we can pick products that work already without having to explain too much.

Christina Noren: So, I imagine doing that kind of empathetic listening with your prospective customers probably gave you ideas. It obviously gave you the idea of the credit card where you have more control over how the money is being spent on the short-term loans.

But if you were to think out five years from now, what would be the range of services that you might offer the Brazilian gig worker?

Mila Pontremolez: Yeah, so, we want to do, other products that we think about is, first, more ways to give credit in ways that are more long-term to them, so it could be bigger loans for those businesses, but then after we have a relationship with them, it’s easier to give a loan to a specific use case.

And we think about, also, attaching more financial products in the way that they receive money, so, connection to their POS systems and having a more holistic view of what’s coming in will give us greater ability to get more products to help them get access to their money before or even to give credit in a way that’s healthier for them. And further down the line, I think about a very holistic platform that helps them on their businesses so we can help them with employee management, we can help them with the taxes and accounting—everything that would make the life of the worker or business owners here.

Christina Noren: So, the other interesting dimension of this is, you know, I saw this in San Francisco as Square was rolling out, you know, I had a, there was a local café when I was living there that was cash only and they resisted any kind of credit cards. And then eventually, Square came along and they started accepting credit cards, and they were worried about—you know, of course they were, I won’t name them, but they were running under the table, and they were worried that accepting payments via credit card and Square would mean that their taxes would wipe them out.

And then I talked to the lovely lady who ran that place after a few months of Square and she was like, “Well, actually, our receipts have grown by 50 percent since we made this change, and the taxes are easy, because we've got a reporting platform, so, my fears were unfounded.” You know, so, I can only imagine that there’s some perceived downsides that you have to overcome in people moving out of long established, informal economies.

Mila Pontremolez: Yeah, in a way, the COVID crisis has sped this up, because most—a lot of the cash has been displaced. And actually, in Brazil, you can only do Internet purchases with a credit card. So, it put them in a really tough spot, because with—most people do not have a credit card, and on the Internet, you cannot use your debit card. So, a good use for our card is also the Internet purchases, per se, so we are empowering a lot of people to just have a Netflix subscription, for example.

But so, we aren’t seeing that much friction with people actually having a credit card. It’s something that people—it’s a big aspirational thing in Brazil, because it’s not that common. It’s more common to use debit or not—for our clients, normally, we're the only credit card in their wallets. They may have a credit card at home that is monthly and they use for a big, big purchase, but they don’t use it for normal purchases. So, they're normally really excited to start using a credit card.

Christina Noren: Yeah, that’s fascinating. I mean, in downtown L.A., I'm just a few blocks from Skid Row, and one of the big social issues is a lot of people who are unbanked and live in tents and have some side hustles and are used to dealing with cash or getting cash handouts and no one’s accepting cash, so people are starving because of the switch from cash to credit cards.

Mila Pontremolez: Wow. That’s impressive—that’s really sad. Yeah, we are, one of the use cases that we saw for our card was people that would have, they would have—imagine you work on several different platforms, maybe like a car delivery like Uber and then a food delivery service, people would get all this income pulverized in different platforms and then a little bit of cash, because here, Uber, you can also pay cash. So, they would have all these fragments of income and they would go to the supermarket and then try to use the three cards plus the cash, you know? And that was one of the benefits, people were like, “It’s so simple. I'm able to pay everything with this one vehicle.” Because only in talking to clients, you can really get a grasp of how it is.

Christina Noren: That’s fascinating. Well, I don’t have a ton more to ask. Paul, do you have more to ask, or do you want to give us your take on what we've heard today?

Paul Boutin: I want to applaud, because I grew up below the poverty line in the United States, but in the 1960s and ‘70s, we didn't know, because my family had a reliable income and there were programs like school lunches that took care of things. Now, I make more money than my dad ever did, but I'm part of the gig economy, and I totally understand.

And we're seeing that, with COVID, we're seeing people who thought that they would never have to worry about money and suddenly they realize that without the predictability, you can’t plan your life. Someone who’s poor can plan and live within their means if it’s predictable. So, you're bringing this stability to people—to many, many, many, many people who deserve it and who work and who are honest and who are not spendthrifts.

The banks don’t owe it to them to give them credit, I understand, but clearly, there is a need there. And it’s great that you found a way to connect people whose lives would be so much better with just a little stability with people who have found a way to provide that ability and golly gosh, once again, it’s software to the rescue. [Laughter]

Mila Pontremolez: Yeah, absolutely. Thank you, Paul. Thank you so much for your words. Yeah, it’s hard to gauge the huge impact that one week of working capital can have on someone’s ability to actually generate more money for their family and we have seen the transformative power in this small scale until now and we are rushing to get our big, more scalable version out the door and be able to serve even more people in a reliable way. Because what we have seen was incredible, and a real inspiration for the whole team.

Christina Noren: Well, it must be very rewarding work or your time. So, Mila, thank you very much for spending the time with us today. I hope to keep in touch as you expand what you're doing, both within Brazil and beyond.

Mila Pontremolez: Thank you so much. It’s been a pleasure to talk to you both, and to the whole audience, thank you so much for listening.

Christina Noren

Follow Christina Noren on Twitter and Linkedin.