Mexico Mobile Payment Solutions Provider
Mexico Mobile Payment Solutions Provider

Mexico: Finding Interesting Investment Ideas In Your Backyard

QPAGOS: (OTCQB: QPAG, $0.20)

 

Here is QPAGOS, which means payments in Spanish. The road ahead could be amazing if this microcap can improve investor awareness, elevate its stock price and gain more capital.

Of course, executing a perfect business plan wouldn’t hurt a bit either. Developing its business model takes a fair amount of dough so management has an incentive to maximize the stock price.

Read on to find out what makes QPAGOS special.

Latin America: Crawling With Cash

When you travel to Mexico expect to hear: no acceptas la tarjetta de credito! What do you mean no credit cards?

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

This is one of the things that makes QPAGOS so interesting. Often people have to travel considerable distance to even find a bank. Trying to pay utility bills like electricity using the postal system is nothing short of a joke. Sure you can pay bills at a local convenience store like OXXO but that means another stop. In Mexico, the paying for just about anything can be a pain.

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

Lots of people depend on public transportation to get anywhere. For many twelve-hour workdays are common as are six-day workweeks. This has the ideal makings for services offering ease and convenience.

If It Can Work In Kenya

While pondering this discovery, I was reminded of Kenya and the success of M-Pesa, the mobile money transfer business that was the focus of a 60 Minutes piece in 2015 titled “The Future Of Money”.

According to 60 Minutes, virtually everyone in Kenya has a mobile phone and this enables them to download the M-Pesa app and transfer money to pay rent, utilities, or anything else where the recipient has an M-Pesa account.

The Potential For Mobile Money

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

This closely matches the number of unbanked citizens. So if M-Pesa can work in a country even more impoverished and under banked, it should work in Mexico.

QPAGOS Moving Forward With 700 Kiosks

Well perhaps it’s starting to. QPAGOS, (translation: Q Payments) appears to be using pretty much the same business model as M-Pesa. According to Reuters, QPAGOS was incorporated on September 25, 2013 so they haven’t been around all that long. Nevertheless, they are making lots of noise.

Reuters describes the company as a provider of physical and virtual payment services in the Mexican market.

QPAG Kiosk QPAGOS.com

QPAG Kiosk QPAGOS.com

The Company provides an integrated network of 700+ kiosks, terminals and payment channels that enable consumers to deposit cash convert it into a digital form and remit the funds to any merchant in its network.

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

Who Else Is In The Game

Reuters identifies QPAGOS competitors to include Wal-Mart, Soriana, Chedraui, OXXO and 7-Eleven. No doubt true but truly the potential is so large, it hardly matters.

QPAGOS has only recently gained revenue traction showing about $2.7 million in 2016 revenues. The leadership is in the hands of 69-year-old Gaston Pereira who has been with the company since the beginning. Senior Pereira’s bio in the payments world of Mexico is lengthy.

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

Could QPAGOS become the next Visa, MasterCard or First Data? When your addressable market is 95% of 120 million population that use cash, the possibilities are open ended. By the way, for those investing in Africa, M-Pesa is listed on the Nairobi exchange. Money is being made in fintech well beyond things like Bitcoin and cryptocurrencies. This includes in places South of the Great Wall of Donald Trump.

 

Disclosure: James Waggoner has no positions and does not expect to initiate position in QPAG in near future.

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James Waggoner

James Waggoner comes from a New York Wall Street career that covered more than 30 years. During that time he served as CEO of Sands Brothers Asset Management and Sands Brothers Ltd. He was the founder of The Kensington Group in 1988, an arbitrage hedge fund that produced IRR’s of 24.2% over a 10-year period. For the prior decade, James was an analyst and investment banker with Bear Stearns Cos. Inc. Institutional Investor Magazine recognized him on multiple occasions as one of the top analysts in his field. His international financial background includes VP of SoGen-Swiss International Corp. in Paris France where he advised major US financial institutions on corporate and global economic issues. James earned a degree in Finance and Economics from The Ohio State University.