Gastón Yrigoyen, CEO of Pomelo: "People around the world will think of two currencies at the same time"

The Argentinian fintech ecosystem is gaining more prominence within the local business world, both for its range of options and its ability to scale regionally. This makes startups like Pomelo, which develops payment infrastructure for both traditional banks and corporations, unicorns, and crypto platforms, a testament to how local know-how can leap to other countries and establish itself as an international competitor.

In this context, Pomelo's CEO, Gastón Yrigoyen, spoke with Ámbito about the expansion phase the company is undergoing after starting its operations in the early part of the decade. This "second act" includes the launch of a new product, the "Global Card", capable of operating in 150 countries, in addition to incorporating a new payment system that uses digital dollars or stablecoins.

The foray into new payment methods outside of traditional cards corresponds not only to the need to establish itself as a significant player at the Latin American level but also arises from a diagnosis about the future of finance: in the coming years, most people will operate in a sort of bimonetarism globally, where each individual will have an account in their local currency and another in hard currency.

When analyzing the Argentinian financial system compared to the rest of Latin America, he highlighted its level of advancement and resilience. He also emphasized local strengths and a regulation deemed pro-innovation, noting that Argentina has an advantage in infrastructure over countries like the USA, which is just implementing equivalent systems.

Journalist: How would you define the current moment of Pomelo? What situation are you in now?

Gastón Yrigoyen: Five and a half years have passed since we founded the company and a little less since we launched with our first client. The easiest way to describe the current moment is that we are entering the "second act" of the company.

Basically, during these first five years, we were very focused on executing our original thesis, which essentially consisted of creating a modern and regional payment infrastructure for all of Latin America. We did that and we continue to do so.

Today, Pomelo has about 300 people, operations in eight countries, and 150 clients of all kinds, from large banks like BBVA, Santander, Banco Colombia, BCI, to many of the major global and Latin American unicorns, as well as corporations of various types and fintechs that are emerging in different countries in Latin America and are expanding and developing.

With this, we have raised $160 million in investment over four rounds with excellent investors from both Latin America and globally.

All the focus has been on executing that original thesis, which consisted of modernizing the payment infrastructure of the region, moving from suboptimal to a regional optimal through modern technology that covers our entire continent.

Following the last investment round, which was in December of last year --- $55 million --- we entered a second act, a second stage in the life of Pomelo. We continue to invest very heavily in everything I described earlier, but at the request of our clients, we have expanded the business thesis and made it more ambitious.

It basically consists of two things; one, transcending the borders of Latin America and two, transcending the borders of the card.

How are we transcending borders in Latin America? With a product we call the Global Card, which we launched two months ago. Basically, it consists of a card denominated in dollars or digital dollars (stablecoins), which can be used, that is, issued to users in 150 countries around the world.

Our client, instead of making a local issuance, issues from a jurisdiction a card denominated in dollars or digital dollars and can give it to their users in 150 countries around the world. With that vector, we extend the card business from Latin America to the world and we start to compete globally.

The second growth vector is to go beyond the card. It is to enter the infrastructure of the other payment rails that exist in Latin America, which are basically two: the first, which I already mentioned, is stablecoins.

The second is a category called "real-time payments" or account-to-account payments. In each country, it is called differently; in Brazil, it is Pix, in Colombia, it is Breve, in Argentina, it is Transferencias 3.0, which are instant transfers, and in Mexico, it is SPEI.

As this is a rail that has emerged a lot, we are getting into that rail with the same thesis: to be able to help companies have that payment solution combinable with the card throughout Latin America.

Q: What advantages are you seeing from payments with stablecoins?

G.Y.: In Latin America, unlike perhaps markets like the United States or Europe, where the card is basically the payment method par excellence, in emerging markets and particularly in Latin America, different payment methods have emerged, which makes the ecosystem more complex but also more interesting.

We see four payment methods, or four rails, as we call them. One par excellence is cash, which is obviously declining and going out, but still has a very important share in the economy, but it is analog.

Then there are three that are digital: cards, account-to-account payments, real-time payments, and stablecoins. We have moved from operating only on a rail that is cards to operating on the three digital rails. With stablecoins, we are seeing that they are super functional to the card per se.

Because in cards, users transact, then all those transactions are summed up, and you have to settle or pay Visa or Mastercard daily the sum of those transactions.

Historically, this was done in fiat currency and could not be paid on weekends or holidays. As Visa and Mastercard introduced stablecoins into that equation, that means that we and our clients can pay 24/7.

The benefit of this is that the collateral—the amount of money that our clients have to put with Visa and Mastercard—just to financially protect the business, is much lower. Therefore, they have much more capital available to grow their respective businesses.

What we are seeing is that they work especially for cross-border payments or transactions. Large amounts tend to be from company to company in a cross-border manner because you don’t have to go through foreign trade, SWIFT, nor do you have banking hours or limited interoperability between financial systems in different regions of the world.

This makes payments much faster and cheaper, which also translates into money arriving faster. By arriving faster, the company receiving it can also benefit in its own business.

Q.: How do you resolve the differences between the various real-time payment systems that exist between countries?

G.Y.: If you take it to an analogy of streets and highways, what we have tried to build is a Pan-American Highway. It's a bit like when you go to a country where they drive on the other side. In the end, you can reach the same destination, but you have to drive on the other side and maybe instead of traffic lights, they put roundabouts.

Ultimately, they all work in the same way, which is basically moving money from A to B, and it can be between individuals or companies.

To create a regional value proposition, what we have to do is be super local in each of the countries and solve cards and immediate payments very well in each of those countries, but independently, regulating ourselves, having licenses, adapting the product, understanding the financial business.

Then what we do is combine all those countries to create a single large regional value proposition. In our infrastructure, we generate that interoperability for customers. That is part of our value proposition.

It's like a unifying layer that unifies regulation and technology so that it seems like they work in the same way when in fact they work very differently.

Gastón Yrigoyen: "Even if we compare ourselves with the best financial system in the world, the most powerful, the largest, we have clear advantages."

Q.: Going back to the fact that you are operating in 150 countries, in which regions are you taking your first steps, but would you be interested in expanding further in the future?

G.Y.: This expansion to 150 countries does not mean that we are going to have offices and people in 150 countries, but that we started doing business in 150 countries and we can sell to companies in 150 countries, and they in turn can provide cards to their respective users in 150 countries.

What we see are some very marked use cases. With the pandemic, large human resources platforms for freelancers emerged. For example, an Argentine or Filipino developer sells their service to a company that develops software in England, and that company pays you in a global account.

That global account usually has a card, and the freelancer, when traveling and buying around the world, uses that card. It's a good use case to illustrate the value of this product.

What we are seeing are two major opportunities.

One is selling to companies in developed markets, which are the large owners of these platforms. There our client would be in mature markets, but their respective client is often atomized across the world.

The other is selling directly to clients in emerging markets, where the aspect of dollarization plays an important role, also with stablecoins. This is very important because the user seeks to have a "hedge" against the local currency.

It's a bit of what we have experienced in Argentina. That is a reality in all emerging markets. What we see is that there are many companies in the southern part of the world, where there is greater currency volatility, that start to offer their users dollarized products.

We see a very clear meta trend around the world: every person around the world will sooner or later have two accounts with two cards. They will have an account denominated in their local currency, with a card in their local currency, and they will have an account in dollars, with a card in dollars.

This is a new behavior. Perhaps in Argentina we are already very accustomed to this, but in the rest of the world it is completely novel.

People will think in two currencies at the same time and will transact in one currency or another depending on what is convenient for them. A person, for example, who lives in the Philippines when they go to buy milk at the store, pays in local currency and that transaction has a marginal cost. It makes no sense to pay for milk in the Philippines with a dollar card that will later charge you to convert to local currency.

But then that same person in the Philippines or in Nigeria or in Ukraine will have an account in dollars and will use that dollar account to pay for Netflix, Spotify, to shop on Amazon, or when traveling to other parts of the world, because there it makes no sense to use local currency.

If you buy on Amazon with the local currency of the Philippines, the Filipino bank will charge you a rate that is very high; it is better to buy with your dollar account.

Our vision is that every person around the world will end up having an account in local currency and an account in dollars with their respective payment methods. And that is the great opportunity we have globally with this card product.

Q: So what you see is a kind of bimonetarism at a global level?

G.Y.: Yes. It’s a good way to put it. Exactly.

Q: What do you think is generating this?

G.Y.: Ultimately, both users and companies, because they are governed by price and experience. Price, as we know here in Argentina, is a great driver of behavior.

People use a wallet or a bank depending on the promotion they have at the store and then switch to the next one because it is more economically convenient. Then obviously if the experience is easier or harder also plays a role, because if I want to buy or sell dollars on Sunday at 3 PM I can’t go to the bank branch.

We live in a much more global world where both individuals and companies need to transact, collect, and pay internationally, as well as domestically, and that ultimately makes people and companies seek out these hard currency accounts. We are seeing a huge number of companies emerging that start to offer one service or the other or both.

Q: What characteristics do you notice in the Argentine financial ecosystem compared to the rest of Latin America?

G.Y.: Both the Argentine financial system and the Argentine finance professional are very good. The average Argentine is very good at finance, partly due to all the cycles and contexts we have had. This has translated into resilience and knowledge, that is, know-how.

But also into the resilience of the Argentine financial system. In Argentina, we have been accustomed to online transfers 24/7 for years. Nowadays in the United States, you still have to pay $10 to $15 for a transfer if you want it to happen the same day. If you want it to be free, it usually takes 3 days.

Right now, the United States is working on what they call FedNow, which is like the American version of Pix to enhance that experience. Even when we compare ourselves to the best financial system in the world, the most powerful, the largest, we have clear advantages: the existence of an alias, the existence of QR codes, regulations that, although there are still some regulatory asymmetries and work to be done, have been very pro-innovation.

We have spectacular use cases, digital banking is well developed. Bimonetarism in Argentina has existed for a long time and is proliferating. Payment methods are very good, access to mutual funds has improved a lot, as well as the ability to invest in stocks and bonds online, and pay for services.

Q: What do you think still needs a lot of work?

G.Y.: I think we need to create a "framework" for stablecoins. It will be very interesting and important because I believe it will generate more efficiency and more innovation in the local financial system. We need more traction, more value propositions, more supply, more usage.

Then I think that in some sectors of the financial system, there is a lack of competition. I believe we have not been able to open up enough; we are still a bit anchored to the few options that existed in the past. There are still a few companies that benefit from regulatory asymmetries and do not promote competition.

This ultimately translates into higher prices and a worse experience for users. I think there is still a lot of work to be done in that regard as well.

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