In the latest installment of the series, QED Investors Partner Mike Packer explains why we led the $15 million Series B round in Hash, a company that connects entrepreneurs and customers through a platform capable of transforming large companies into financial service providers.

Hash, a payments infrastructure and fintech as a service company in Brazil, just announced their Series B that QED led last year.

When I first met Joao Miranda in 2018, I was impressed with his vision of what a more dynamic payment technology stack could mean for the Brazilian market. The company was still working on its product with Leo Madeiras, but I was very curious to watch the company as it started to gain traction.

Well, the traction came and here we are. Beyond having a great team and vision, what is creating this massive market opportunity? Hash importantly sits at the intersection of two mega trends in fintech:

1. fintech as a service and
2. payments

Over the last year or two, there has been an emerging trend in fintech that is now talked about as “embedded fintech” (I highly recommend the Forbes series “The Fourth Platform” from Matt Harris).

It wasn’t too long ago that a16z made the prediction that "every company will be a fintech company". I think the jury is still out just how big embedded fintech will be and how much non-financial companies will rely on revenues and profits from financial activities, but it is undeniable that (a) the market is huge, (b) innovation is coming, and (c) it is both possible and easier than even to integrate financial offerings into other transaction platforms.

Just last week, I wrote about the execution of this trend with Kavak and its lending arm, Kavak Capital. This is great example of where fintech can make a difference in a B2C transaction – creating less friction, leading to better value for the consumer and resulting win-win for buyer and seller. Loft is another example of this – it is near impossible to separate the financing decision(s) related to buying a home and the decision of which home to buy.

The “Fintech as a Service” category is admittedly broad, but largely captures the trends of embedded fintech. Hash has found a way to create a win-win for suppliers and buyers through its payments solutions. The buyers increase payment flexibility and acceptance as well as increase working capital; the suppliers build deeper relationships with their buyers, offer a means for working capital, and in turn can generate more sales.

When it works, it’s a beautiful cycle. Hash is making payments a part of the B2B relationship and suppliers and buyers love the product – easy to integrate and flexible enough to suit a diverse set of needs. And the payments product is just the beginning of what they can do.

Speaking of payments, it is quite an attractive market in and of itself in Brazil and LatAm. Payments in LatAm are fraught with friction and the payment revenue pool in the region is the fastest growing in the world. The combination of these two makes the market very attractive for investment.

It is no surprise that as more cards get issued, more merchants are looking to accept cards. In Brazil, look no further than Stone and Pagseguro to see the continued growth in merchant acceptance:

• Stone – 653,000 active clients, 36 percent growth in 2020.
• Pagseguro – 7 million active merchants, 35 percent growth in 2020.

And look no further than PIX in Brazil or Mercardo Pago to see that consumers are very willing to try to payment methods that make it cheaper and easier to transact. The cost of payments will continue to go down and merchants will continue to seek flexibility in accepting payments. The market winners will be defined by their ability to add value beyond payments. Hash is in an optimal position to deliver on the integrated value proposition.

QED is thrilled to officially welcome Hash and Joao Miranda to the family. We are very excited about what the company can accomplish and the opportunity to partner with them for years to come.