Creating Fintech Success Story in Emerging Markets: The inDrive Approach

Conversation with Alina Zavorokhina, head of product and business at inDrive Money

Accepting payments in emerging markets has always been a challenge. Enabling local currencies, local payment methods, and staying compliant with local regulations are just some of the problems that businesses face when they operate in these markets.

I always wanted to speak to someone who had already achieved some significant scale and success while operating in these markets. This is why, for today's interview, our guest is Alina Zavorokhina, who is the Head of Product and Business at inDrive Money. If you are not familiar with inDrive, inDrive is a global mobility and urban services platform.

In today's conversation, we'll be taking a deep dive into some specific and unique challenges that inDrive navigates while processing payments across the geographies they operate in. We'll also discuss inDrive’s innovative financial services offerings.

Can you give us a high-level description of what inDrive is and what role payments play in inDrive's success?

I think that actually not so many people know about inDrive, because usually when I travel somewhere, for example, to Europe or the US, everybody asks me, "inDrive? So what is it?" We are a mobility company. We run an app that allows users to hail rides, order courier or cargo deliveries, and we primarily operate in emerging and developing markets. And that's also kind of our mission. We know that in developed countries, there are already so many services, and there is no challenge, you know, just to order a taxi or, for example, order some food. But in developing countries, the challenge lies in how to provide these services to a wider population and do so on equitable terms.

inDrive is originally from a city called Yakutsk, which is the coldest city in the world. The origin story is that one day the temperature dropped to negative 40, and there was actually a problem ordering a regular taxi because taxi operators doubled their prices, and many were stranded in the cold and could not get where they were going. That’s when one of our colleagues, who still works at inDrive, created a social media group to connect people. So, if, for example, you wanted to go somewhere and you had some space in your car, you could pick up this person and go somewhere together. And that's actually how inDrive, with the 48 countries where we operate now, was born.

Regarding payments, that's a super interesting topic. If you order a car with inDrive, you, as a passenger, usually pay directly to your driver. In most cases, inDrive does not handle this transaction. Usually, people pay cash, as we know that cash is still the most used form of payment in many countries where we operate. They can also just transfer money online to the driver's bank account or pay with any popular electronic wallet available in the country. That’s how we can provide freedom to both drivers and passengers, as they actually decide both the price and the method of payment.

You mentioned that inDrive operates in emerging markets. So I would imagine there are lots of interesting challenges. Can you tell me a little bit more about your payment strategy in these markets and what's your recipe for success in accepting payments in all these different countries?

The main challenge is providing the most convenient payment methods for our users, and understanding what those methods will be in all of the countries where we operate and then keeping them stable. We do have a kind of internal wallet, and if you are a driver, you need to top up this wallet in advance to be able to later get some orders from passengers. We, as inDrive, will charge a commission from this wallet at the end of the ride. The commission is not high; usually, we charge just around ten percent, while, for example, our competitors may charge up to 50% of the transaction. And that means also for us that we can't afford a high commission when we pay for payments from providers.

The challenge is finding payment providers that allow us to offer convenient payment methods to drivers while maintaining low commissions. Drivers usually top up their wallets at the beginning of their day. They may have a bank card, but usually, they have cash. That means for us that we also need to provide cash payment methods for them. As a result, we have different payment methods and partners in all of the countries and also manage the commission to keep it at the same 10% level everywhere.

Global payment methods like Visa, MasterCard, and PayPal are all trying to cover as many markets as possible. But local payment methods are also very popular. What trends do you see? Do you see that domestic payment methods are growing even faster?

Definitely, we have different scenarios in different countries, but I think in general we have 30% of transactions made by a bank card like Visa or MasterCard, 30% in cash, and 30% by some local payment methods. But there are some differences. For example, Mexico is one of our biggest markets, but the payment trends there differ from what we see in other LATAM countries. Despite efforts to introduce local payment methods (SPEI, CoDi), they haven't gained significant traction yet. Instead, Mexico seems to be following a similar path to the US, where cards gain popularity. But when we, for example, go to Brazil, there is PIX, which is already a world-known success. They provided the payment rails so that with PIX, you can transfer money instantly from one bank account to another in one second without any additional commission for the people making the transaction. And in Brazil, 90 percent of our drivers top up their wallets with PIX.

So, there are many cases in the world, and definitely, local payment methods are booming, but it also depends on the government strategy and how they help local payment methods grow.

You mentioned that the payment landscape in emerging markets is very fragmented, and you need many providers. Are there any other challenges you're facing when operating in these emerging markets from a payments perspective?

I think stability is also a problem. To ensure payments are consistently available for our drivers without interruptions, we always need strong backup options. For example, last year, we had a big project building backups in different countries for other payment providers and payment methods.

Another thing that we're doing is integrating with payment orchestrators, which help us manage the payment flows between different providers and methods. I may say that it's a real success case for us because we’ve managed to reduce costs significantly while improving the product funnel, leading to a much better user experience and more efficient payment processing overall.

When you talk about the savings opportunity, do you mean mostly on the fees that payment orchestrators allow you to route transactions more efficiently, or do you mean more on the integration side that they can save you hours of work in building integrations with different gateways?

Actually, that's a good question because as of now we calculated only the savings on the cost for the fees, but I like your idea to also calculate the savings on the integration side. I think we did save on the integration because usually, they provide the payment methods included. We still need to, for example, sign contracts with the payment providers, but regarding the integration, it's already included.

You said that inDrive treats drivers as entrepreneurs, and I believe you recently launched a couple of new products for drivers on the fintech side. Can you tell us a little bit more about these products?

Two years ago, we created an internal startup, now called inDrive.Money, and the aim of this team was to find out what kind of financial products we may provide to our millions of users. We found that there are no big challenges among our passengers and there are many other financial products in the market they can use. But there is a huge injustice when we speak about drivers. These are people who work for themselves as gig-economy workers. They choose to spend their time, energy, and car earning money for themselves and their families, and usually, they work with some platforms, and they earn enough. But usually, traditional banks and financial organizations don't know about this income, and even if they do, they don't find it valid and reliable enough to provide any financial services to drivers, such as loans or credits. We spent one month traveling across Latin America, talking with our drivers, and we found how difficult it is for them to get credit when they need it.

When they go to the bank asking for a loan, they get declined, and they need to go to microfinancial organizations that don't decline but provide inadequate interest rates. It's just impossible for them to pay on time, and in the end, they ruin their credit history. That's super sad, listening to these stories.

And what we did was the launch of a new product – cash loans for the drivers. The advantage is that we know how much they earn, and there is no other company in the world that knows that as well as inDrive. We then partner with a financial institution that scores the data and provides the loans, and we enable the whole process for drivers through our inDrive app. That's how we built a credit product customized for them. Drivers loan the exact amount of money with an adequate interest rate so that they can get cash, pay for whatever they want, and then repay the loan by continuing to make rides with us. We not only provide the cash, but we also help them repay the loan on time thanks to seamless integration of repayment into the inDrive app. This is the exact moment when they build their credit history for the future. That's how, in the future, they can get a loan for a car or a bigger amount of money.

We launched this product last year. First, we launched in Mexico, then we scaled to Colombia, and now we have two more countries to launch this year.

So, I would imagine if you're scaling this product, you consider it a success. Do you measure success for this? Is it more about the value you bring to your drivers and increasing the value of your platform, or do you also see this as a revenue opportunity for inDrive?

Actually, both. When we started this project, we were focusing on the users. That's how we found this issue, that's how we found the partner who helped us build this customized product. It was just a test. First, we tested the demand. Then, we found that, first, our drivers love this product. We did NPS surveys, and we know that the probability that they will recommend this product to their friends and colleagues is 75%, which is amazing for a credit product. Second, we know that the drivers who took a loan started making more rides with us, which is exactly the benefit for the main business because that's how we increase loyalty and retention. Drivers trust us, and they see that we trust them too, which makes our connection with them even stronger. And number three, we also earn on that. We earn some revenue share. That's why I would say it's definitely a success because all of the three stakeholders – users, the main ride-hailing business, and us as a financial startup – all have some success here.

Yeah, that's great to hear. You mentioned that you also help drivers repay the loan. So, I would imagine that's how this financial product is integrated with the global inDrive system and platform. Can you tell me a little more about how you actually help them do this, and what's the experience like?

The magic here is that we just added an additional commission for them as a repayment for the loan. As I mentioned, we charge a commission as a fee for using the inDrive app, and now we’ve included an extra, small percentage after the ride is completed specifically for loan repayment. That means that drivers still need to top up the wallet, but then, when the ride is finished, they pay the commission for inDrive and also pay for the loan repayment. In the end, we found that drivers were pretty happy with that. One of the reasons why they said they would recommend this product to their friends and colleagues was the repayment with rides. From their perspective, they don’t need to do anything additional to repay the loan. For them, it's all about convenience and building their credit history, as people in Mexico, for example, understand how important that is for their future.

What are your expansion plans with this product? You mentioned that you are in several countries right now. Are you planning to expand to other countries where you operate, or are you planning to add new features to this product?

We plan to scale to more countries. I think this year we will end up in four countries, and during the next year, we plan to launch in an extra four to six countries. That takes time. Every country has a legal scheme that we need to research. An additional integration is sometimes required if we work with a new partner there.

We definitely want to test more ideas about this credit product and repayment with rides. It looks like there is a huge need for credit products among people working in the gig economy, and this repayment with rides is a super convenient method of payment. We also consider some tests with passengers.

When you said the product for riders, do you mean financing for their rides, like "buy now, pay later," or do you mean just if they need to buy something outside of the platform and there will be some sort of financing?

I think we will explore and test different options. Riders trust inDrive, and that's a really nice opportunity for us to test what kind of financial products we can provide to them. Regarding "buy now, pay later" or "ride now, pay later," there's a nice case in India. There's a taxi company called Ola, and they have this "ride now, pay later" feature. Based on comments in the market, that's a pretty interesting idea. I know that Uber also launched this "ride now, pay later" feature in Europe. That's something we want to test first.

Let's talk about the future of payments for inDrive and the future of fintech products. How do you see payments evolving in the next three to five years? Do you see it more on the expansion side, or are you planning any new features on your product for customers?

I think we will discover some methods for how we can still provide online payments for passengers. If we want to gain a new audience, we need to solve this issue with the costs and the convenience of payments.

One idea we have is to keep this convenience of payment directly to drivers but simplify the user experience. For example, enable drivers to suggest the payment methods they want to get payments from passengers. For passengers, automatically provide drivers’ credentials for quick payment through bank services – usually, it's a phone number or a special code when we talk about PIX in Brazil. Another option is payment links. Whatever it is, it is still about connecting passengers and drivers directly, keeping the costs as low as we can, and making the payment process a bit simpler for riders.