Q3 2020 PagSeguro Digital Ltd Earnings Call
Hello everyone and thank you for waiting. Welcome to pack cigarettes third quarter 2020 results conference call is being recorded and all participants will be in a mode during the corporate presentation after Park Sakura's remarks. There will be a question-and-answer session at this time further instructions will be given should any participation need assistance during the call, please press zero to reach the operator. This event is also being broadcast live webcast and may be accessed through our website at investors. Box included. Where the presentation is also available participants Mayville the light in any order they wish the replay will be available shortly after the event is composed of those following the presentation right webcast May pose their questions or pack cigarettes website before proceeding likely mentioned that any forward statement included in the
Reservation or Maisonette on this conference call are based on the currently available information and executors correct assumptions expectations and projections about future events. While others believe that there are episodes shows expectations and projections are reasonable in view of currently available information. You are cautioned not to place undue Reliance on these forward-looking statements actual results May differ materially from those included executors presentation or discuss it on this conference call for a variety of reasons, including those described in the forward-looking a Statesman and risk factor sections of five cigarettes a registration statement of form 20-f and other feelings with the Securities and Exchange Commission, which are available on Paxil gurus investor relations website. I would like to remind you that during this conference call the company may discuss non-gaap measures for more details for going on and the reconciliation of these non-gaap Financial measures to the most directly wage.
Irepo Gap measures are presented the last page of this webcast presentation now.
I will turn the conference over to mr. Riccardo SEO, which you may begin your presentation good evening everyone and thanks for joining. Our third quarter results conference call Thursday night. I have here with me Eduardo Karo or Chief Financial Officer are to shrink or Finance director and and Ricardo our head of investor relations.
I hope you and your families are well and safe. Everybody knows the past few months has been challenging and we remain focused on supporting or clients or business partners Society in our in place.
By the way, how do you like to pay a tribute to all extraordinary people who work at bank bank Bank Street Grill and who have been supporting our business from their homes and the last eight months. Thank you very much, but I can make a possibility as we've seen an access lights even without continuing impact generated by COVID-19. We see positive Trends in terms of Engagement nuclides Edition an electronic payment volumes. We are helping table for results or business exceptional resident and improving day after day.
I'm glad to announce that in this quarter all-time high absolutely TV and historical records in that new editions for both versions and by the bank users results of old confidence in continued investment in our business, despite the challenges scenario finally important to mention that during these months we have been developing features and products from both like Ryan in banking businesses who seemed to be the most complete and unique two-sided ecosystem to explore these huge addressable market and we are just starting
Regardless of the current moment we are confident in our strategy opportunities ahead of us who you continue to manage the business for the medium long-term while recognizing year terms realities, which means that after a company for the opportunities accelerated by COVID-19. Why we invest you grow the company
That said Eduardo car and I will present some nights and we will have communication at the end.
I'm sorry, sweetie. We highlight the achievements of the third quarter.
All-time high TV reaches close to 45 between the eyes growing 53% a year or 44% year-over-year exclusive coronavirus choosing packed our online TV grew 121% year-over-year showing another quarter of acceleration is sustainable in expecting rain going forward it as we expect online payments to be a growth driver for a company.
Active Merchants Richard 6.3 million adding one point three million new clients in the last 12 months in historical record of almost half million Americans in one single quarter month total revenue and income which is close to one point eight billion reais growing 22% a year over here a very strong rebound when compared to the previous quarter growth also or re-record.
Netta crate end of the quarter of 2.35% down 37 basis points quarter-over-quarter or 2.58 percent excluding of Office Products down 14 basis points. Quarter-over-quarter is slowing down the decrease compared to previous quarter, but it's still temporarily impacted by the TPP Mix song meaning more debit card transactions unless credit installments directing backing or prepayment revenues non-gaap net income was 338, you know, 18.5% or 28% excluding their change as our abuse report is to impacted by the pandemic and investment impact Bank.
Our existing that margin excluding pandemic and tag Bank investment defect ended at 29.3% in the first nine months of 2020 growing point six percentage points when compared to the same period last year posting continue operating leverage in the car business.
Auditioning. We're glad to announce that in November back seat completed the acquisition of network card that we accelerate our online strategy.
Moving to a bank or a peg Banks TV previews know as no acquiring TV through banking digital account in wallet Services, which twenty-three didn't realize growing 312% year-over-year another triple digit growth or 286% exclude the coronavirus ML320. No, acquiring TV volume is 12% higher than the full year 2019 volumes.
Craig Bank clients, we're 6.7 million represented all-time high net additions of 1.8 million in one single quarter.
To reach a 2.2 million consumers growing eight times a year in a red representing one third of our total package Bank clients.
Bank bank revenues reached $133 for the quarter up 190% year-over-year. We accelerating when compared to previous quarter and we presented 7.5 person two two rifles and finally it kept increasing our cashing process 2 different products with bank cd's clients close to 50,000 payroll portability strange reached $150,000 and finally more than $400,000 extra. Tik-Tok. Only two months after the official launch the service on site for them to make you for trades.
Or may top-line keep your eyes suggested TV for acquiring in total revenues in income continues on accelerator mode.
TV is growing above 60% in October and in sharp below. We can see healthy TV trends when compared to the first half of March which is pretty COVID-19 in Brazil.
Keep if he has been improving and in the first half of October, which is 144% of the TV of the first half of March with both credit and debit presenting growth. Although deputies are still growing faster.
Megabass tpv growing close to two hundred percent year of a year in total revenue and income accelerating and growing. Hi 2008 year our whole we are in the middle of heat for a month and still have some impact to make it to depend with a continue to hire mix of debit, which is also historically stronger in Q4 and continued Investments and tagged and we expect people results and profitability in Q4. We expect or non-gaap net margins to recover and to be between twenty and twenty 1% on Slide Five represent our operating highlights.
Total payment volume reaches close to $45 billion reais growing close to sixteen didn't realize or 53% when compared to the same period of last year.
Our Diversified motion days with no Geographic concentration residents of the micromotion segment in adoption of online cross-border incarnate private transactions support a strong rebound that continues into for additionally excluding the coronavirus impact many transactions that we capture through QR code that will present the 2.7 be notarized birth order. We grew 44% sure of the year. It's still a strong role.
Next graph we show the largest portion of volume growth is coming from debit card transactions, although both debit and credit have been growing David grew faster with it. Mix of debit card has increased more than 20% when compared to Q3 2019 while overall credit cards mixed decreased 15% as a consequence of the Dead.
Oh negative emotions will reach at six point three million in the quarter adding one point three million new sellers or 25% of a year and half a million. You want All in This Club reaching a circle headquartered in adding 56% more emotions when compared to Q3 2019.
Our new client or is too much or too long tail with similar size in behavior. When compared to other cohorts is to see that seventy 80% of our new sellers off never accepted cars before it was too confident. That long tail Mark is approximately one-third penetrated. It's a huge potential to keep a strong base in the coming quarters.
Also important to highlight that in Q3 we launched the new device or mini z NFC now enable for contactless transactions helping Nano and micro entrepreneurs to improve the sales as contract payments are becoming quite irrelevant since the start of the pandemic additionally. We ended the quarter with four hundred fourteen thousand software subscribers going three times, as long as you keep the diversifying additional self-service Erp loyalty and Reconciliation features to our clients.
on next slide
To spend some time talking about online strategy.
Online has always be a very important vertical four bags as he started all Journey back in 2006 as an online wallet and payment provider.
Although in recent years or offline growth was much stronger and the main focus of our strategy. We kept invest in new products and solutions to offer the most Complete omni-channel product offer to our clients wage, but with the beginning of the pandemic in the social isolation millions of cells and consumers became the first time
Bringing an agency for companies like this to improve our Solutions includes you the best experience for a client who's your addressable sustainable and growing markets going forward was used to has a long road to run as online represent less than 5% of the total retail sales bringing in relevant opportunity to fax to explore a potential job market of almost a hundred thirty billion reality t v assuming that Brazil can reach similar online penetration levels compared to u.s.
A cord to beat news and Survey the first six months of 2020 online sales with 4% year-over-year mini growth three times larger than expected before COVID-19 the highest growth in the last twenty years Brazil reached forty 1 million online users having almost seven point five million new ones on the first page of this year additionally 58% of the total users made online purchase at least four times in the period and 20% of the users did more than ten am showing you very healthy combination of new users both Sellers and consumers in Hickory, NC.
Text as well prepared to explore this growth as we have one of the most complete platforms that combines wife. She calls from micro small and medium businesses many of those going on a Ford first time you complete end-to-end platform for Marketplace and e-commerce with the recent acquisition of em over IP VoIP services for consumers and cross-border trade with our block or Brick Company. So the result is that or online tpv glue 121% in Q3 when compared with Q3 2019 accelerating our growth the best quarters and showing signs of the stronger growth with October growing 163% We are very additionally or cross-border business is doing very well. I'm going almost four times here over a year capturing the majority of the TV outside Brazil mainly in other Latin American countries in Europe.
Or a cobra has a very strong presence in the gaming vertical in gradually expanding its exposure to others such as travel and entertainment software and physical boots off finally in November. We completed wipes wild-card position starting integration process since the beginning of the month and prepared to accelerate. Our growth going forward is the best in class online platform of the Brazilian Market.
Yes.
Expect the line would be irrelevant growth driver in the coming years and the fax is ready to lead this process for both Sellers and consumers now, I'll pass the word Toyota Corolla or something to talk about the financial performance. Thank you Eduardo, please. Go ahead.
Thanks, he cargo and hello everyone. It's great to be here today. And I hope you all are safe and healthy in the Nexus line. We present our Revenue figures total revenue income grew 22% year-over-year reaching almost 1.8 billion realizing the quarter showing a strong rebound actually in the next graph in the right side breaking down our operating revenues transaction activities and other services grew 38% year-over-year also showing a very strong recovery compared to 4% in the second quarter.
our financial income Revenue also improved when compared to the 8% decrease of served in the past quarter and flat on a year-over-year basis as a consequence of the consumer behavior during the pandemic leading to last credit card transactions in installments in our transaction mix
important to remember that our prepayment model is automatic. Meaning that every credit card installment transaction is automatically prepaid instantly dead in D + 14 or D + 32. Our clients in the shorts below. We present the recent PPC Market data provided by the Brazilian Association as of Q3 2020 important to show that the market is growing at 17% year-over-year or 10% excluding Coronavirus.
With debit cards growing 41% year-over-year or 22% X coronavirus on a year-over-year basis while credit cards are only growing 1% showing how the mix has changed across the board as a consequence of the consumer behavior during the pandemic wage based on those numbers is gaining market share in both products in our total volumes grew 4. Times faster than the market excluding coronavirus shoes.
In the next short we present our next a crate which is the Blended take rates net-front transaction costs such as interchange processing and off-screen fees that's reached 2.35% down 37 basis points quarter-over-quarter, excluding. The coronavirus is in fact, I worked a crate reached to point 58% or 14 beats down already easing the pace of declined sequentially as a consequence off the temporary mix effect already discussed earlier in the next line. We are presenting our costs and expenses structure and not income performance.
starting
With our non-gaap total costs and expenses. We ended the quarter propelling 1.3 billion realize growing 44% off. Are you breaking by categories our sales and services costs grew 58% driven by higher interchange costs Thirty 7% year-over-year as we grew our TV by more than 50%
Our personal expenses grew 62% year-over-year as a consequence of the expansion of our bank bank teams hiring more wage, eyvallah pers cards credit Investments sales and insurance professionals. Our DNA has also increased 200% year-over-year as a consequence of an unprecedented Merchant Edition extension during the quarter boosting POS acquisition depreciation and higher amortisation of product development and tag teams marketing allocated in sales and services also increase by 42% year-over-year home with higher Investments to promote digital wallet Bank bank products and engagement.
Moving to selling expenses. We highlight costs related to chargebacks declining as a percentage of the TV from six 21% 2.18 percent year-over-year even with higher exposure to online sales and a credit portfolio off twice larger than in Q3 2019 driving to a healthy kak
Right no gasp net income reached 330 million reais a decrease of 15% year-over-year, but 8% higher when compared to Q2 2020.
It's important to remember that in every Q3. We have the stock based long-term incentive plan Grant leading to a larger non-gaap markets and Mom adjustment in this quarter. We had a total of 67 million reais impacted by the stock performance in the more pressured FX rate from u.s. Dollars to realizing the. For more details. The reconciliation of these non-gaap Financial measures is presented in the last page of this webcast presentation bottom rights non-gaap. Net income. Margin reached 18.5% in the quarter is stable when compared to Q2 2020. This is exactly what he mentioned during the last call is stable margins comparing you to 2022 Q3 2020 and we shared in our queue for
2020
Trains is light. We expect to expand net income margins in Q4 comparing two to three.
Movie to the Nexus line. We highlight the main operating and financial kpi for Peggy Bank in the first chart back Banksy TV previously known as known no warranty TV, which twenty-three didn't realize growing 312% year-over-year or 286% excluding the 1.5 billion is volumes related to coronavirus. Up moving to back Bank clients. We ended the quarter of reaching six point five million users growing 257% year-over-year and adding one point eight million new users in one single quarter.
In the short below represent the evolution of our consumer base consumers reached 2.2 million users in Q3 growing $8 year-over-year in the red representing one third of the total pack Bank base showing our ability to expand our addressable Market as we become a complete Financial digital ecosystem move into the next short our bank bank revenues ended the quarter at 133 million reais, actually reading 109% year-over-year in the first nine months of 2020. Our total Bank bank revenues reached 3030 medium size and growing 103% year-over-year a triple digit growth. Despite our decision to be more cautious. Yep.
New credit origination since q1 2020 that we are resuming in Q4 2020 as well as the launch of new products in the coming months as well as further these figures show that we are in the right track to reach 30% of our total revenues coming from back Bank in four years.
Thank you all and now I'm passing their work. So he called who will comment on the latest business developments.
Thanks to the movie July 10th.
Want to share how we are positioned or ecosystem in strategy?
Thanks. He grew was born in 2006 starting as a new wallet people like model for millions of Brazilians two people live in a safe in his way in overtime became the largest payment provider for micro small any division of professionals three, very completely on the channel offering that goes from very basic and entry level and POS divorces to cross-border and online checkouts not forgetting about self-service software features to engaged in help or clients to sell more and better.
Payments Market continues to be our car business a market of twenty-seven didn't realize opportunity. Maybe the long tail that is a sewer open at rated with higher margins few wage seeded competitors, you know higher barriers to entry as we already discussed in the past. We are investing to become more than just a mission acquiring company since the beginning of our banking journey in early 2019. We are investing in new products software people in marketing to position or company Trenton in a much larger market.
We believe that the bank is well positioned in Nevada robust and you need two sided ecosystem that combines payments banking use the wallet investment and insurance to 6 and close your products and services to our active unique users and new customers both Sellers and consumers all these combined with a very strong brand and unique scaled back online distribution back in by URL and 1 year and 1/2. We already reached it almost seven million active users. Probably the largest gross of a pistol Bank in Brazil in a very short period of time by launching and upsetting new products such as banking including cards and credit Investments and insurance and expect in our approach to Consumers. We estimate the market pool is almost Seventeen times larger than payments.
Depend Emich accelerate this digital first mindset for payments and banking including millions of Brazilians for the first time and combine it with initiatives such as pigs and Thursday. Thank you. You are ready to leave this digital transformation resume.
According to I BG in Brazilian Central Bank, there are $68 billion bank and people in Brazil additionally twenty-eight million of low-income population to have a bank account in fifty-seven percent of the population are interested in adopting digital Banks do today 40% of the paychecks are paid in cash 6% of wage do payments are also made in cash and finally 51% of the new bank accounts are open just received the payroll on slide eleven represent. Some of the month is around next steps or banking induced of Wallace's strategy.
Start with credit offerings or credit portfolio and the quarter that $485 1.4% quarter-over-quarter off the reach it a hundred thirty two thousand conference with every secret transaction reaching to point 1000 reais.
As we discussed the passage meetings and conference call we decided to be much more conservative through the pandemic environment and reduce it new credit originations and refocus on renegotiating the existing contact with our clients, which helped us to keep our NPO levels stable and healthy.
Cover of the merchant sales since early July we started to ramp up new origination, but it's still below poverty levels.
Expect to reach close to pre COVID-19 levels origination already for 2020 an accelerated Pace in 2021.
We're focused continues to be our best versions. It's still underpenetrated as we have a lot of data from our clients and we expect to launch new credit products in the coming months increasing exposure to collateralize these credits such as tables and supply-chain finest so-called discounted applicants.
On investments we are just getting started with Peggy vests. We believe we can help our clients and Brazilians overall to invest better just to give some perspective in October 2020 cuz you achieve it 130 realize invest in savings accounts with a very poor remuneration.
Since the beginning of the year, we launched a new investment products such as our own saving account product in more recently several new proprietary CDs that pay interest rates that goes from 110% to 170% over CDI with daily liquidity right now. We have close to 50,000 client with investments in bank bank interview is very solid number given we have three investment options in order the very beginning of our investment roll out.
For instance before the end of the year, we expect to launch the first investment firms such as much Market FX equities some orders from third-party Partners. Do you have an extensive road map of new products in the pipe for 2021 on the bottom left? We provide some color about our issues initiative in Q3 bought the extended or telemedicine Specialties from 2 to 20 in the first quarter 2021 expect to launch life home and equipment insurance with partners and leveraging complete portfolio products in app.
Finally early this morning on November 18th. We launched our Marketplace product or new pack been shopping cart with almost 40 relevant stores in multiple categories providing a unique user experience, especially end-to-end sales in addition to the cash back offer and purchase.
On the shopping platform, we connect two ends customers and retailers on the one hand. We have almost seven million account holders. Hi Rick Erwin's in our end on the other hand. You have retailers eager for recruits and efficient marketing it higher or sales conversion. The more details that our partnership which results in higher engagement potential new products and monetary no alternative to talk about bags. You need economics that just a marginal analysis hundred, please. Go ahead.
Thanks Ricardo and good evening, everyone.
On July 12th, we show some important metrics over paybacks and Returns on investments world record Merchants importing business actually good is Merchant acquiring business continues to deliver may be back to solid Returns on investments on our salary position spend the first chart despite the larger investment in marketing and sales and higher POS subsidies started in 2018. We continue to observe efficient payback directs on gross profit achieve that in average in four quarters or more precisely in 10 months moving to the next chart 2018 seller cohort we show strong Returns on investments reaching 6.7 times after eleven quarters return on investment is calculated by dividing cumulative or profit of the 2018 cohort of merchants by seller cost of acquisition including marketing and sales plus POS subsidies of the year. When awarded or yep
Limescale strong brand with word to mouth brings higher barriers to enter in our Market additionally or efficient paybacks and positive attention have driven strong Merchants lifetime wage in return on investments of the Nexus light. We present the managerial analysis about packs Core Business margins in the chart below comparing the first nine. 20 21st is the same. Last year. We provide more caller in how the pandemic and investment Sontag bank or impacting temporarily or non-gaap net income margins month starting with the COVID-19 back with the partial shutdowns in Brazil negatively impacting our TV growth special late, March April and early May in second with temporary changes in the consumer Behavior, which means less leverage and we spend more oriented to essential Goods. The consequence is a changing the TV mix with faith.
Growth on debit card transactions including the coronavirus and lower growth and credit installments extremely poor related to credit availability. Also impacted with lower ABS light bulb Banks the past months all these temporary changes drove to lower take rates and margins. We estimate the pandemic impact of 238 million the first months of twenty-twenty decreasing our margins in five percentage points is negative impact is transitory and should recover over time. Not only for Thursday for the whole card industry all those too early twenties Pates or to forecast the face and timing of the full recovery recovery event that there is no structural changes in products and consumer Behavior. We expect credits and name installments to recover with the three openings improve it consumer confidence and financial institutions recovering credit origination.
Appetite in the market including us moving to bank Investments.
So investments in 2019, despite the pandemic we kept investing the most important verticals such as probably development software people engagement in a marketing. We know the fact Banks essential for our business strategy and we put us in a much higher degree of growth and profitability in the coming years, but larger upfront Investments are needed and expected in the short meter. We're building a new and exciting two-sided Financial ecosystem, but clearly expecting to decelerate the pace of Investments over time. In fact feeding for operating leverage as we start to scale and monetize some of the initiatives such as cards loans and Investments and insurances.
Those are more meat term effects. We started.
We had a negative impact of 141 million reais of fact Bank investments in the first month of twenty-twenty meaning three percentage points off in that margins to conclude the ration of this analysis is to show that despite the short term negative impacts of pandemic in our business was midterm larger up Faith estimate make extremely relevant asset for it as they expect Bank a record business. You'll get that margins keeps benefiting from operating leverage in a stew posting healthy profitability life, despite the competitive Landscaping result. Although we understand the nature of operating leverage for a scale business such as tax and repair and I prefer stability or a focus wage right now is to grow as removing too much more relevant ecosystem more than just a merchant acquiring company and entering in a market 17 times larger than payments as we discuss it off.
Just ability is part of a rajini and we will continue to deliver solid bottom-line results. However, we believe that advent Investments are the most efficient Capital location a strategy for now. No, I'd like to hand over to Ricardo again.
Finally move, which is like fourteen or like to comment about the existing opportunity in Brazil and how pics couldn't log massive Financial volumes to be captured them operated in the financial system consequently boosted user of data Bank.
To start we are happy to say that according to Central Bank initial figures bags was the third largest plane Peak ski registration to be the account destination of big sketching you figure shows a very strong acceptance and engagement of our client base and we foresaw review the tag bank is becoming the final destination of our clients both Sellers and consumer.
We Believe speaks will be complimentary to card payments mainly because the Dynamics of the payment transaction is very different from where you are transferring in also because of the maturity of card payments in Brazil purchased a bushing or consumption culture with roughly to that the cards in One credit card product representing 41% of our total PC private consumption expenditure months, since you purchased a boost electronic transaction in leverage Financial inclusion to millions of bank and under service Brazilians
Bye.
Also has the largest installed POS basically country which allows our service to offer fix transactions through QR code fully integrating our platform bring the inconvenience the business days for transactions. We will charge them the hours for QR code transactions and we expect Peaks transactions to deliver healthy profitability in a win-win situation for us in our clients.
India's will be lower than debit cards, but also at lower cost to Banks as we don't have card skin fees neither interchange.
I'll do it cards payment is much simpler than Peaks Peaks transactions could get shot over cash consequently generate additional revenues and contribution margins for bikes.
In conclusion, we are prepared to increase and consolidate or leadership in the long-term Market, which is a huge due to the large number of micro Merchants any former, please and we'll grow do to accelerate of the ships from cash to electronic transaction and increase our addressable Market into the consumer vertical true pregnant.
Although we are pragmatic in understanding and managing short-term impacts are COVID-19. It seems the words of the crisis behind us and they keep confident about the destroyed from the month before this is the strength of our brand the bank bank policy pretty consistently have built so far and last but not least or execution capability.
Will you keep investing our long-term strategy in people products services and goals We Believe tags is uniquely positioned to lead the digital transformation of payments and financial services in Brazil for both motions and consumers finally before we start our Q&A session. I'd like to pass the word to Eduardo Carrillo to make an announcement about New Roads in our team, please go ahead and order thank you again. He called just before we start I'd like to make an important announcement about extension of our senior managers. I'm glad to announce the promotion of Arthur shrunk as our new CFO Arthur is a great talent developed internally that has done a fantastic job for a faxed over the last seven years being responsible for accounting fp&a and the logistics teams a top-notch professional with strong background in
Finance at companies like Wal-Mart and you're well, I'm not going anywhere and I will take a new role in the company as the new Chief Business Development officer wage remaining as a peg Segura board member their transitional be gradual and expected to occur within the next 6 months the company only benefits from the expansion of our management team and Ray forces our commitment to promote internal talent to the most important senior executive positions. Let me pass the word to actually hello, and thanks for the opportunity to just some brief words before we jump to the Q&A session firstly. I hope everyone and your family are doing well during this hard time. I went to say that I am very excited with the new challenge and after almost seven years have had or fp&a treasury accounting Logistics, and yep.
Irrelevant prices to package the package Bank. I'm taking the role of CFO willing to keep
It's a great work done by Eduardo Eduardo and all of the team on supporting my journey until now. I am looking forward to enhance our relationship in the coming quarters. I hope we can talk soon having said that we finish our presentation and we will start the Korean a section.
Thank you. Will you now begin the question-and-answer session? If you have a question, please, press * 1. + to remove yourself, please. Press star to our first question comes from Mario Pierry Bank of America. Please proceed.
Hi everybody. Thank you for taking my questions and congratulations on the quarter. I have two quick questions the first one in thank you for providing more caller, especially on page thirteen this detail breakdown here of your which you consider to be investment an impact on your marriage. And so what else trying to get when you say 3% In fact from pagi bank, is this a number that we should continue to see increasing over the next five years, which is a number that we are thinking and this number should eventually go to zero just want to make sure also that this number is just like one-time Investments. They do not include recurring expenses.
And then my second question is related to your credit portfolio like you you mentioned right you have been very cautious the last two quarters in originating new credits that you are ready to start Landing more. But, you know, when when you when you became cautious, what drove you to become cautious, did you see like a pickup? In fact, I did you see a pick-up in delinquencies, and that's starting to normalize. Now. Was it really you were expecting given the uncertain environment that things were going to get worse? And if you if if you can give a any color on the profitability of this portfolio any, you know, if you can share about any our way metrics, they'll be very helpful. Thank you.
Hi Marty, this is Ricardo. First of all good to hear you. And thank you for the question while talking about the investment Banks advising the 3% I don't I'm not exactly percentage for the next year. But for sure we'll keep investing. In fact think I don't think in 2021 or even 2022 we're going to see that going to zero because as you can see that there are a lot of opportunities ahead of us. You see that impact Bank. We are growing, uh triple digits in terms of revenues growing a lot in terms of wage users. So we have a lot of opportunities that we we cannot decelerate at this point and say, I don't know fifteen twenty fifty million reais in the bottom line instead of growing faster than we will explore the importance that we have, uh, the audience that even called accelerated more people getting digitalized and doing things online buying online for the first time.
We we will keep you investing in E.
In fact think we gave some some information or some color about the next features. We want in Investments. I'd initially outside. We just allowed to the shopping the market place to the month. So those are low on world map of features that you line launched. So that's why it won't go to zero for sure in 2021 and probably not even two thousand two thousand two because there is a lot of opportunities that we have to explore regarding the the the credit when independent get started in the second half of March we kept on waiting our our TV, uh, seeing the behavioral for emotions and of course, we saw decrease some restaurants improves that I'm not selling anymore. So as you know part of our collection is based on the TV, so we decided to stop and also if you evaluate all the banks in Brazil, they all did the same.
They just decreasing the the credit concession Brazil. There are a few companies that keep giving more Chrysler the pandemic which is you know, if you is it's a very risky thing to be doing the video clips on them. So that's why we we stopped it. Uh-huh. We didn't see the linguistic Omega. They'll give you some some information just just to to help you to understand but uh, we had to brake really appreciate some of the contracts because the the mergence were not working the the stores were closed and so on we started giving some credit again in the in July because the connectivity was coming back as we we could see the previous slides the TV is growing again, of course more in debit, but keep if he's coming back economic activities coming back. So that's why we decided to to give some credits in July in terms of n plz don't disclose the exact number but if we look at the the slide eight we have in the right bottom. Yep.
The chargebacks of course chargebacks. We have everything we have to charge back from the cars. But if there is any delinquency in the in the loans, they are there as well. So if you look back went out from Twenty One basis points to wait in basis points, so it's it's very controlled in the middle of the pandemic. We had some back and forth with the Motions, but in order to view agents we are doing very well when we move the schools will give more more power than that when you think it is appropriate when the the businesses is bigger than it is today.
Okay. Now that's very clear. If you can just go back then on the Investments if I get Bank this one-time expenses, right? It does not include any recurring expense just like a bank in this figures, correct?
It's usually promise development people. There are some products that we need to lie to need to get maintenance you need to to develop to make it better off the pollution. So, uh, I mean 100% is not a current for sure because some of the problems that do lunch. You don't need to keep the same size of team doing maintenance or things like that. But part of that will be reduced because the business is growing the business changing. We aren't Dynamic industry, but I mean going back to a question is straightforward is not a hundred percent recruitment. I bought a majority of that is is launching new features and marketing. Yeah.
Okay.
Thank you very much.
Our next question comes from Greg autonomous research. Yeah. Hi. Hope everybody's well with your voices God wanted to ask on the acquiring side. You know, you showed a lot of new directions for acquiring whether it's e, through or Thursday. I know you were also doing some larger merchants in acquiring. So I wanted to get your thoughts on the long-term the long-term average Merchants choice and how we think about TV proactive Merchants over the long-term plus how these this mix change or potential Mix Change will impact take rep. Thanks.
Thank you for the question regarding what usually has a large emotions because they serve e-commerce and marketplaces. It's worth to remember that behind is marketplaces. We have thousands of smaller versions that sell online so but you're right if you if we come back and watch t p u is already TV. The average is larger than what you have today. They wouldn't use that is 100% online and you don't mind environment take rates are higher than in the offline world because of the risk because these are not cut present transactions and things like that. So, um might that's the answer regarding regarding the way the large emotions. We do a reactive work right because some of the merchants came to us asking for our services we we don't have let's say strong proactive work to get dead.
To to get larger versions, but if they come to us if you see there is a there is a crazy that we have margins. We will serve them. We don't have any problems in having a large immersion Thursday we have uh
Play Steve Martin's or a positive contribution margin. So it's let's say in our interview here. It's easy to go up but to go down with much more difficult. So as you could see the comments that try to come to our Market wage, but looking in in the middle term, I don't think the the profile Forward Motion base will change because of our focus is still on table. The majority of Americans are long tail. They are a small so all these two movements that you mentioned the the more and also the larger Merchants. Uh, I don't think it's going to be enough to change the Dynamics the way we we took the company in the past year. It's probably it'll grow a little bit faster than inflation or things like that, but I don't think it's going to change that's that's not another plan because the focus is too long tail all the facts bank and Thursday is all support on Dale. So long is the focus and we will be the focus and regarding calculates. Uh, if you go to our website or if anyone goes your website,
See that we don't change the prices. Of course there maybe a few commercials that came to us to renegotiate but small percentage, but he didn't change prices the majority of the the take about the window into Suite is because of the mix if you look at the the components there, we'll see that the the financial income went down.
A lot because you are having more debit transactions that we believe is temporary is changing the mix is temporary because of code means, uh, all the industries is seeing more growth in the diabetes. Look at the the the industry cards industry Brazil. You see that David Bowie 40% year-over-year and credit only 1% So that's we believe in something that is going to be temporary and and took that back as our lives, a little bit back to normal again.
The follow-up just one question. Do you expect to pursue a cross-sell opportunity with more if there are Merchants choice that also have material presence in the brick-and-mortar point of sale.
Yeah, Craig, that's for sure. We see in Mike. We see at least two two big synergies here one the revenue in the top left of the other one in the cost that we will have the email income. So in terms of writing is we will cross sale or Solutions of our offline Solutions and POS and EFT reconciliation to my clients because Mark has some large emotions in Brazil that you use my card online world and and use another acquire for the POS or physical store. So we will close sale or solutions for these Merchants. We also have the other way around you have some versions here that are part of marketplace or have some small Market places than and would like to use online solution that we can cross-sell Mike. So those are the two cities in terms of top-line and the terms of cost as I mentioned more was a super choir so used to log
To work with other inquires to operate in Brazil. And of course, they paid a few basis points or they had some additional costs by using a third-party. Now, there are a hundred percent classical they are working exclusively with us. So we don't have this this additional cost anymore that you have a lot the VPN of my so, uh, my wife is going to be Thursday might be is already profitable and will be more profitable in 2021. Okay. Thank you.
Our next question comes from UBS.
Hello, good evening. Everyone. I have two questions. The first one is related to the credit portfolio. Can you share the breakdown of how much is related to working capital loan know how much is related to credit cards and how much they expect to grow next year during a presentation. You mentioned that you plan to accelerate the credit portfolio built twenty Twenty-One. And my second question is related to fix. Could you share with us? How much are you charging for pics transactions? Is that fix the fee per transaction or percentage of volume or no charge for for the version? Thanks.
Hi, Maria.
Good to hear and and thank you for the question regarding the credit card photo about roughly speaking here. Once there is credit card in 2/3 is working capital. That's am I speaking. That's the the breakdown of our credit portfolio. Uh, we plan to grow in 2021. And of course that's a dynamic thing, right? Because we have a lot of discussions all the time and we we follow the what's going on with the the whole economy and the whole environment. So to say to to Define our our credit concession, but our plan is to keep giving the same price that you gave before conveyed close to ninety a hundred million per quarter roughly speaking. That was what we are going before and that's what mine for 2021 but of course, it can change. It depends on what is she in terms of the environment here in the zero regarding Peaks wage?
We we are charging NPR's for Pete's because in nuclear codes we charge the motion. It's slower than debit card is more profitable for us because we don't have the cars confused and interchange. So it is plugged in our website. We are charging up to 1.89% off. So it is public it is no website. That's what we are charging. We we evaluated some case-by-case because some options that we had a a smaller debit take wait, we we are charging a little bit, but the the default rate is 1.9% but just to be clear here just fix it started yesterday the day before yesterday is very odd beginning and see transactions at this point, but we are ready to charge we have six million PLS in the market. We have the better distribution or the large distribution the in the country. So, uh as you age,
Before we think it's going to be neutral to positive for four packs a group.
Thank you.
Our next question comes from Reyna Coomer evercore.
Good evening. Congratulations are drug. Oh and Arthur on your new roles. It's really good to see the TV growth remaining strong in two four Q. Can you help us quantify the benefit you're seeing from co-workers and two four q and what impact that could have specifically on your eighth grade and then On a related question should we expect the strong trajectory of merchants net ads you did $474,000 in 3Q the continuance of work you in 2021.
Hi Wayne, I thank you for the question. If you exclude coronavirus 44% still very strong bank account here all the transactions that you had with QR codes, uh people using the the app to to have access to the coronavirus your friends. Um, so, that's the answer for the question regarding that adds as you could see we have the best corner in terms of that adds almost 500,000 that adds that's something that we are very proud of damage to have this size or this number of of new emotions coming to us is to to the 80% of them know that said call before joining us. So we are still really bringing people knew people to the system and creating these markets and in part of that you can see that the industry as a whole in Brazil until Thursday.
regarding this is
10% excluding coronavirus impacts you grew 44% So we are bringing you really knew people to the market going forward. Uh-uh. It's hard to say if I keep the same level but I don't think it's going to go down dramatically, right? We had three hundred thousand and two almost $500 in five hundred thousand or three months. So our view is going to be something between these two numbers in or December. We have only half month because of the second half of the summer people are more focused on the holidays and things like that. Uh, but she's too strong Trend what we see in Q4 until now. Okay great and just one follow-up in the third quarter your transaction expenses that was up 71% year-over-year. You just tell us what the driver's was for that increase and how how we should think about transaction expenses going into four Q?
Yeah, I know. I need some help here for his wide or or 400 because I don't have this number in front of me here. So so it's hard to understand. You know, what you did not have last year is the inter-company is the inter-company taxes on the POS. So basically the the increase is explained by the additional expenses that we are having with it either company feel a sense because uh in this quarter doing part of the quarter, we acquired the POS threw a secure company from Subaru. So that's the main reason.
Very helpful. Thank you.
Our next question comes from Brian King, Georgia Bank. Hi guys. Congratulations want to ask on on the bank of margin the non-gaap net income. Margin. It came in in line with your expectations. I think around 18 and 1/2, but you are expecting a pretty material Improvement to 20 to 20% increase for what's driving that impact why the Improvement I guess and then I guess secondarily on on that take rate because the mix will be still heavy with vouchers and probably even more debit. Should we expect to take great to deteriorate a little bit further just as as that Mix Change has its impact
Hi Brian, this is Ricardo. Thank you for for the question regarding the emergence 4424. I will start in anybody can compliment but it's a mix of many things in life you two or three was 18.5 and we are expecting 20 to 21% in Q4 part of that is explaining because we're going to have more volumes and we can dilute more wage would cause we also if that keeps growing as we see because in Q4, we have the 13 salary the transactions costs, maybe a little bit lower. But those are the truck drivers that that I can give us some car at this point, but I guess it's rather than the complimentary bit more and and we also seeing a slightly increase of the on the table on the on the take off when we moved to the the the whole Q3 compared to what we have in October. So as regardless of the name of the day is expense leveraging in the little bit birth.
Okay, great.
When we look at October compared to what we have seen interest rates.
Got it that helps and just one follow-up question when we think about it you guys ramping up the ecosystem and particularly looking at the insurance and the investment off the marketplace. Can you just go through those three three additional ecosystems and talk about how you guys will get paid directly from those. It sounds like some of this might be referral transaction fees. Thanks.
Yes, just to to complement Eduardo answer before but he said that it's it's getting better genetic rate. October is better than the average to 3 just to be clear that it's not a crime. Yeah, The Interchange and lower transaction costs to your plan just to make sure because just just just to give a little, we we just shared it to four Trends. So we're seeing is growing 60% revenues growing. Hi twins year-over-year so somehow we still have some pressure on the revenue youth but lower transaction costs will drive to his life better. He's driving his life and he better take great not take great expansion comparing two to three on October, right? Yeah. No, that's helpful. I'm sorry about and regarding the ecosystem means like 11:00. We we have three blocks here that kind of knew which are the device Insurance Marketplace. So it's we're going to be dead.
If a rebate based on the the funds that we distribute, uh, of course depending on the funds, we have more Commission in other funds we have a little bit less, but the the the overall business model is to receive a rebate for the funds that we distribute. Some of them are based only distribution. Some of them have performance fees as well and receive parts wage. Actually, that's how we're going to monetizing part you guys, uh insurance is a hickory business. We we don't have the operation of insurance work with Partners Thursday. We distribute you we charge every month and we have a fixed cost with the parts and we can make this gross-up of revenues for for this product different things that we charge every month we have in our planes as well. So basically we monetize Insurance Marketplace.
Deleting works is then right now is the percentage of the sale and part of that. We we can give back as cash back for our clients part of that. We we can take for us. So that's the the business model for the market place is very Diversified. That's why we look for to have some of the revenues based on our performance such as the market place some of them based on recruitment such as insurance. So we try to have to balance these two types of weapons one that is more consistent than the other one that is depends on the performance if people by the market, but we started today it is doing well. It was great that you launched in one week before of like Friday. So we are we are confident. We did the right move in this project. So, let's see how it's going to be performance.
Great. Thanks guys.
Our next question comes from John Gregory, Oregon Stanley.
Hi, what if I quickly from Morgan Stanley congrats on the results? Hi everyone two questions. If I made the first one, I just heard your recurring working on page thirteen. I wanted to understand that 5% that you're attributing to the pandemic mix I guess is that just basically saying if the mix between credits and debits in the nine months of 2020 would have been similar as the previous here then, you know, net income flows the impact close all the way down to the bottom line or or is it relative to the mix that you expected to have this year. Question, you know as Plastics continue to penetrate in Perl variable continue to grow faster, right? I mean, I think that's Thursday.
It's going to be difficult to have that stable mix over time the more you substitute cash the more debit point you have and so I wanted to understand exactly what what what what's behind that 5% If you can explain how that works. And also what gives you confidence that, you know, we're going to go back to be the same mix again. I think one of the things that happening in this environment is that we're bringing forward years of classification of payments. And so I thought maybe we don't go back to where we were last year that that's my first question first question. Sorry, and I have a second one later on. Thanks.
Speaking. So you're correct. We're pretty much let's say measuring the mix of fact that is in fact in particular eight of the company. We had an expectation to have that pretty much take great stable year-over-year. So around three point eighty percent that does exactly the take-away that we had the first nine months of 2019 off and then given the hammock the the change in the consumer behavior and much larger growth of that car transactions a very strong increase on those Corona Buster's where you have also a lower take rate so that, and somehow drove the company for let's say lower margins in in the first nine months of 2020 in your second question about debit. It's true that debit continue to Brother Brazil because we still have only 40% off of penetration of cards and review and deputies are very important product but not forgetting that credits also extremely relevant wage.
For the Brazilian consumption, uh, you could see the numbers that we shared through all the card Association tax credit cards are all grown 1% year-over-year. We do not expect these wage to last forever. We know that private is very important problem for purchases in Brazil special of installments. We do believe that with the re-openings with let's say the better consumer confidence week the banks recording the appetite just like tags something example. We are expecting credit cards to rest and recover and then take rates through but again, we don't believe that there is a charge change no credit cards will continue to be extremely important for the market remembering that before the COVID-19 pandemic overall credit cards, including regular one and not all meant to be represented two-thirds of the transactions. We don't see a reason to see that's this changing after the pandemic. This will recover as things starts to improve in Brazil and also just to confirm
thank you for the question, which is
Here we see that the consumer behavior is changing because people are staying at home. So I mean people are not travelling people don't go to restaurant people don't don't buy new clothes and things like that all the things they used to do with a credit cards. So that's also part of the consumer behavior that changes because of the pandemic and this coming back a little bit. I guess the other thing that you did say that the that the debit participation was growing and then it started growing went down a little bit in October. So it's it's part of the sign that that is the the the economic activities coming back and then people start using credit again related to the point that under said that Banks, uh, we're not giving credit for the people that are really need people that need more credit. They didn't have access to credit. They were applied to use a debit and also people that receive the financial aid from the government they using the debit mode as well. So that's why we we believe it's going to be something temperature.
And it will get back as as we get back a little bit more to let's say a normal life again.
Great. Thank you. And thanks for that. My my second question is on on the on the 434. That's evidently very impressive wage. And then you did say that, you know, it's probably not sustainable and that figure a little bit lower or somewhere between where you where you ended up in the second quarter and the third quarter seems slightly off. I give trying to understand what is it that drove, you know that, you know, sixty percent of jumping that is is it also the pandemic is it, you know, people are losing their jobs because of the pandemic and having to find new sources of revenue under joining in the force of entrepreneurs with your mark. How much of that is under your control how much of that is really temporary and you know, hey, maybe could we see, you know this level for the next two or three quarters if a game?
What is really based on on things you're doing and just the momentum of the brand and the growth in Tagalog language is alerting people about also attacks. And and so I'm sort of like that Circle of having, you know, ten plus or you know, what is like 12-plus meeting a client, you know, if you have to tour I don't know how the numbers for me but it's just these massive number of clients feelings into the brand recognition and and and just the overall. Uh, I got that customer acquisition.
George you're right. It's it's everything that you just said. I mean we what is he knew people that really need to sell through credit card debt part of that is because people get an employed some people that let's say they have a restaurant they use of competition now, they need an additional device for for delivery. They try to google.com. We we are seeing our brand being even more stronger as time passes by because all the Investments that he marked that we did in that lease to do today. So that helps as well. We try to make some advertisement Lincoln piggy bank and policy Bureau so that people can get a device and they they have this complete and free digital bank. So all these things may help not to say the competition in Longdale also decrease the little bit because you know, the increments decided not to play in long table anymore. They they are vocal with that some of them they wage.
From compare their prices with ours, you see that they are three times more expensive than S. So it's a means of everything.
The our brand or distribution channels online that we can we can cover the whole country has 93% interest in Brazil so we can leverage this audience more people buying devices for delivery less competition some people get unemployed. So that's that's the obvious reasons help us to wage has this jump in terms of the ads. Uh, we we saw a stronger ads in October as well. So I mean the trend is it's very made us confident that we can keep track of volumes of marriages in the next quarter's and and the follow-up to that Ricardo. Thank you. Is it is it possible for you to add? You know, one point one? One two million clients next year. I certainly was not consensus would have thought you know, say, you know in January before and then it started is that kind of like where we are now, it's dead.
Let's let me answer this way in 2018. We gave the soft guidance that we would have one need an ad and then we had close to one point two million this year. We already have one needle into the Q3 roughly speaking. I guess all these um performance that we are seeing reinforces that we are right would say that a long tail. We have only one-third penetration if you send all the long table clients from privacy and other players, let's say you're going to get close to 12 million or thirteen million page, uh emotions and we have in our information here and it starts from the official agencies that we have Thirty to thirty-five million people in Brazil working by themselves. So, that's we think that that we force that you are right depend attrition will tell you is still small is too low and I guess it's feasible that you're going to have. Only
In 2021. Let's see next quarter's. I mean it's hard to say that it's going to be that this year. We we thought it could be 1 million is going to be much more than that. So but I guess it's feasible because there is a huge much to be to be exploited in the long tail motion that we that we are specializing in that is the our Focus.
Thanks. Thanks and gratitude for the quarter. Thank you.
Our next question comes from James fridman subscriber have that.
Good results here. I had two questions. I was asked him up front. So we calculate the wage growth in average tpv per Merchant. It looks like it really accelerated. Our calculation is 16% growth. I won't ask you to do the math. I can explain how we did it. But anyway in general do you see the TV / merchantry accelerating and if so why that's the first question and then I want to ask about this slide twelve which is the cohort analysis. This is really helpful. Thank you for this disclosure. What are some of the best marketing channels though that you're finding in your customer acquisition approaches. Does it remain very dependent? Maybe you could just talk about the customer acquisition wage?
approach in general sort of
First on TV Prime Merchant II on the the CAC Trends. Thank you.
Hi James, regard regarding regarding your first question. You are right in your calculation TV promotion accelerated the bath water. Our calculations here shows above 20 about 20% during this water. There's not one single explanation for that wage. I think they end up the day. It's a combination of several things are the Investments that we're doing in in the brand the investment. They were doing back bank Thursday. We have the most complete offering in terms of banking and acquiring for the long-term market. So those Investments are actually paying anything back and also as as regarding Nation to to to avoid here before we are having more people in the deceased.
And um more people that are are getting again. I'm not getting their their formal plugs are getting uh, getting fired and becoming individual Governors. So that's not a a unique answer for that. I would say that the many many pieces coming together and just reinforces that we are in the right path in terms of Investment Bank investment in the brand. So on and so forth. This is recorded just your compliment. We also see more digitalization people using less cash and people buy more online people using more cards using more. I see a contact person's actions. So all these friends also help to increase the the average TV promotion. So that's just complimenting the first question and the second one that you left off.
Um bag banks. No acquiring TV. It is in this number everything that our clients do in the account. So if they use the car off the top of the mobile phones if we make wire transfers if they use our super app to to buy computer their cars, so everything they do using the money they found in the the account like bank account. It is in this, uh, total equality TV so we can say that it's the activity they do in our lives. So that's not correct regarding Tech. Um, he has a crack went down into three because we had this huge number of methods close to five hundred thousand Vol is important for the distribution, uh to make the brand when we launched and you new features such as the shopping that allows you today. So you are all helps a lot. But we also use other platforms that we use all the other authors.
Platforms such as Facebook that they have also huge audiences. So we are we using are allowed to try to use as as bad as we can.
But we also use other other platforms. Let me try to control cat as much as possible all the time. We looked at we don't lose that every day. We looked at in today just to be clear here. We are very odd focus on you have a local check every day and then sometimes a day in some cases.
Thank you very much.
Our next question comes from Thomas potato btg pactual you may proceed.
I'm good evening everyone. Thanks for the opportunity. So my first question is regarding the the marketplace initiative. We have seen many players off the lot and I just wanted to get a bit more detail on how the bank Marketplace to work. And and do you have an inch and process that clients can can can conclude the transaction one hundred percent within your ecosystem and and and it is open to two people that are dead, but do not have a bank account and and how you see the strategy to scale this business. And and if you intend to to wage to be aggressive in cash back as we have seen other players to to gain traction faster and and and and then our second question.
Hi Thomas, is it required to thank you for the question regarding the shopping. You need to be a bag client. You should be able seems today earlier today. We have uh
American the app called services and inside Services you see the bottom shopping. So everyone has that it has a bank account has access to the shopping you click they're going to see the offers and you can see the cash back for for each store or for each offer. We launched you today at this point. It's not a hundred percent end-to-end with all the stores. I used you been redirected to to the store website, but that's something that we are working. And of course, we will. Eyes to have the stores that they have more engagement and stiffness. In fact, we will integrate uh, first to have the process inside or 100% here, but just aren't you today. It's early to to Define which one's going to be the best. We already off. Of course, we had a huge audience in the app. So we we saw some sales right after we launched the the feature and the cash value made some tests. We don't believe that he needs.
To be giving cash back forever. We have a strong base. We got the good offers so that people can come here too because they see some Advantage. So right now we may even part of the cash back to your clients, but it can be more aggressive depending on the offer or it's going to be a very Dynamic thing. There is no one hundred percent world that we're going to give 100% cashback or 50% know it's going to be a case-by-case. It depends on the store depends on the offer. I mean, it could be a limited offer for a few days or something like that. But what you have in mind here that if we have the right off for a huge audience that you have in the app people use people who stick with the the solution. So that's the the answer regarding the market place shopping. I guess she have another question, right?
Yes.
Yes. Yes. Thank you very much for the the explanation and my second question is regarding the data on July 12th on the return over in that and and and and thank you for all this money is closer. This is it's very welcome and just wanted to have an idea because here you are taking the Chicago 6.7 you're taking into account the cohort from 2018. And and and please correct me if I'm wrong. But since then the market kind of became much more aggressive in the subsidies in the sales and then with the car off the market kind of easier a bit on the level of subsidies how have the the level of this change it from doing this. And and how this would impact the return over investment that we would be seen for the next cohorts. Just wanted to get a little bit of distance if you have dead.
Hi, can I speak to in terms of paybacks be very similar close to four quarters close to ten eleven months in terms of returns first reporting to say that the level of let's say more aggressive subsidies only pay less business. I started in 2018. So the lab of adding 2019 you can change dramatically let's say so maybe the pace of return was a little bit lower in is lower in the in in the 2019 cohort, but let's see very similar Trends doesn't change dramatically. We can say that we don't we had marketing campaigns. Although we had some subsidies the returns continues to be extremely fast and extremely aggressive after a few quarters. So it's true that probably the pace of growth. It's a little bit slower and compared to 2018, but still very health club.
and in very close to that trend
Okay, and and just one more follow-up in this number you considered ravenous at the bank, right? So so going forward you even have a room to increase the return is that correct know in the analysis we exclude bank. It's only about the cord Merchant recording business for sure that the the future cohorts or the new cohorts. We're getting more engaged on pack Bank. We expect faster returns home. Okay? Perfect. Thank you very much.
Our next question comes from Jeff Guggenheim.
Hey, thanks for squeezing me and congrats on the results. I just wanted to Circle back unpack bank and ask you a couple on that reported 6.7 million customers this quarter off as well ahead of where we were that's been happening throughout the 10 minutes, and it's been really interesting to watch your platform over the past few quarters. You have new Partnerships Marketplace strategy off talking bastard super app strategy. So I just wanted to ask you if you could talk about our bank a little more in the sense of you know, do you have a feel for what type Bank can grow to over the next twelve months. Maybe that one point eight million quarter recording members nice Benchmark you sending a blank screen for your opportunity here. So just curious to hear you talk about that. Thanks.
Oh, just thinking for the question. I guess part of the the group that we were seeing back bank is
Do return on investment that we've been doing since May 2019. Remember we launched back back in May 2019 as a very basic account. And from there. We we have lots of features and evolution in the ecosystem with interest rates paid in the balance that you have here. Then we launched it CDs. Uh, then we launched a document Health super life partnership with gas stations with with cabify Brazil, which is kind of the humor company Brazil, so we will try to make this app
More complete the status is by so that's why we keep investing that it's not secret for anyone that we we still have some some new features that we will launch as we disclosed in some of them suggest bug invest with investment funds treasury bonds a new insurance lines such as home and equipment and the equipment to include mobile phones. So how long it'll be more complete in the next quarter. That's for sure. And and that's why people some of the people come to us because one of features or a few features are combination of features. So it's hard to say I'm wide is 1.8 million why they came to us exactly because we have everything some people come because now we're going to have people coming to us because of the marketplace because of the cash back, but I guess the whole mess of shooters that we we need to improve the ecosystem and the black Bank ecosystem as much as possible to be complete and to leverage the strengths of our brand so that we can bring customers dead.
Um more volumes of customers it it's hard to give you the number but we had 1.22 and 1.8 in Q3. So it is a strong. It is something we have in Brazil 30% of people don't have a bank account part of the people that have bank account. They are under service. They have a very basic bank account in their Traditional Bank faith in Austin and they don't have nothing. So that's why they we also get some people that already have some some bank accounts or basic bank accounts because our ecosystem is more complete and this free month. So the combination of things we are we are confident back bank will keep having a millions of of customers in next quarter's it's hard to give a number but the trend is a strong strong.
Okay, I appreciate that. Thank you for all the color.
next question from Neha Agarwal HSBC
And that's that's wrong because and thank you for choosing other question very quickly on the 6th. The number that you showed me that station. It's it's quite exceptional performance. What do you think was the driver behind such high number of stations? And do you know how many of the emergence have resisted the pickup with you? And my second question is on your product Pipeline and very strong product Pipeline and insurance and Marketplace. Should we expect more organic growth and interest partnership. Should we expect to change some Animes in any of these business areas? Thank you so much.
I need thank you for the question.
I'm sorry. Thank you for the question regarding the order number three part of the explanation. I would say you that our our Merchants are some reasons here off of all our emotions and our clients. They they have influence in Iraq. So when we launched something when we we put in the app people really engaged so they they come to the advisory. That's it. First thing second one they are used to have these digital experience. So to to have this key with the situation, uh, it's uh, a hundred percent digital experience. So I'm the controller app and then it's very easy to to make this key registration. It also is part of our objective here or go that to be the Main Financial service provider for a client's because when they they come to us and invited to their Peak ski for a strong message. They they want to work with us. They don't want to work.
With someone their Bank in the market because they decided to use back Bank as destination of money. So that those are the reasons that we see here the engage in the services are providing the customers that like the services. We are providing the the understand or app very easily. So those are the main reasons and they're seniors and the main banquet information provided for them to do the image.
regarding the the Partnerships we
Usually we are making Partnerships organically. That's the the more common path. It doesn't mean that we cannot have emanates. We are actively Market to look for him and he's butt off as used to see before we don't bite volumes of tpd because that's something that we would believe we need to build by ourselves. It's usually done by volumes. But if you see there are some countries out there with features that can speed the Apple roadmap. We will look for sure and we evaluate so in Q2, for instance we bought zero which is a loyal company for restaurants. They they used to be a desktop feature desktop software. Now, we are moving then to our POs to our smart POS. Uh, so those are the type of emulate that are looking the marketing companies that can speed up our our roadmap and there is no one candidate at this point that I can disclose to you, but we are always looking for for companies to help us in our dog.
Thank you so much.
Our next question comes from Victor shadow.
Are you guys good evening? Thanks for taking my question first. Congratulations on the new roles happy to hear that the company's managing to to keep the talents and off. Congratulations again. So just one quick question. It's about the relationship between the target blank TV and party Bank revenues. They are not growing at home base naturally because of the expansion the fast extension that you are posting TVs but implied they create is dropping quite a lot. Right? So what we should expect for the upcoming choirs, should we we expect some sort of normalization and like Bank revenues gaining more traction and growing closer to what we are seeing in terms of TV or some at least some sort of stabilization of employment a great so how to to think about the Transformer pagi Bank revenues, even the
the very strong
Performance on the TV side. Thanks.
Hi Victor is Ray speaking? I think that is somehow related to the condemning. So some of the important products where we have a higher monetization such as the cash card or credit card the prepaid card. We saw that activity. So let's let's use it unless people using during the lockdowns, although whether recovering in in June 4th part of that group also would come from the credit portfolio where we decided to be much more conservative during the pandemic. So are the two most products in terms of monetization in the other hand other services that we capture as a more current TV where we have lowered unitization such as new payment or biotope or wire transfers for 30 bodies off the alarm or use it during the pandemic. So I'll say that it's more related to a mix of fact in terms of the products that are being used it especially during the pandemic rather than any kind of impact.
To take away. Off of important projects such as cards or recapture very healthy crates in the credit origination. There is expected to recover too close to Reliable home those two frequency levels already in this perfect. Thank you. Thank you for the question. Thanks everyone for your patience.
Next question comes from Josh Becky Bank.
Thank you for all the the content and and the questions. I just wanted to ask about consumer view, you know, very quickly seeing to have ramped 2/8 million true consumer accounts. So I'm curious, you know, as you went through October. Is that a trend that remained? Obviously, you had some really good stats. Otherwise you shared about October but I'm curious if that strength in consumer has continued and you know as you age look maybe not for Q4 but in the year and in years ahead, how do you think about the strategy of of really making that consumer number much particular on the acquisition of those consumers a much bigger contribution?
Hi Josh, good to hear and and thank you for the questions. I don't have here the October number in the top of my mind. But as far as I remember, it is not decreasing not decelerating. Uh, so nobody said it's the accelerate and if there was a decent Nation probably people would you would say me so, uh, I guess part of the the answer here is dead. As a nation before is we don't have any more complete ecosystem or brandy is more well-known than used to be one year ago. We launched a bag banking May 2019. So we are building these brand that's why invest in some some point we of course will keep looking at the CAC, but at some point we need to build this brand because I'm not going to pay pay back in the future. So the same thing that we signed policy go back in 2006. We would build this plan. We have this brand equity and then it was good to libraries dpos later on Thursday.
years later later, so
In fact bank is the same. We invested money to look at the car all the time. We look at the downloads. We follow the the funnel pretty close. How many downloads how many new sign off account signups how many people activate the so we are following this this funny when we try to optimize very often just too should be good here to have the lower Tech. It's very easy to open up a bank account just need to download the app and you can open account in app to 3 minutes and right after that you already have a virtual card. So it's it's very useful for people to have this type of service day right after they opened the account. They have this virtual card. They can buy online. They can sign up for Netflix for streaming services. They can ask, uh who birthed that's all the appeal that we have here. And that's why people keep coming to us. We try to be self service to be simple easy and to be free for the consumer. So when you think God
2% of the population in Brazil don't have a bank account. So there is a studio huge Market of 56 million people that we can address and you can offer pack back to then. Uh, and in fact, usually that's that's the the situation here is to our huge Market to be addressed in to be exploited by us.
Really helpful. Thank you.
Thank you. We now conclude the Q&A session and we proceed with the closing remarks.
Hi is this one think everybody for a time today? I hope all of you and your families are safe and healthy, and we look forward to being able to see all of you in person as soon as possible. So thank God. Thank you very much for your time and have a good night everyone. Thank you.
That is concluded by the cigarettes conference call for today. Thank you very much for your participation. You may now disconnect.
Yep, you get a credit card or money off my account bank account and open your account in 3 minutes. Yep. Yep. Yep.
I don't see the taxes on your own.