Diego Villarreal
CEO
Castor
/
View from the Top

Castor: Helping Customers Access, Save Their Paycheck

By Sofía Hanna | Mon, 01/10/2022 - 16:58

Q: What are your priorities for the funding raised through Castor’s latest investment round?

A: We raised US$1.8 million in a pre-seed round. The funds will allow us to further optimize our distribution models and accelerate our growth in 2022. The main objective in 2021 was to develop a unique and innovative product and we launched in December. Now, it is going to be all about growth. By that, I mean enabling as many workers in the Latin American region to leverage the Castor card to access wages more flexibly without having to pay ridiculous fees.

 

 

Q: What attracts investors to solutions like Castor and why should more of them pay attention to this app in particular?

A: Our investors came on board because they also believe in creating financial inclusion through affordable access. That really allows us to lift more people up from the status quo and generate greater wealth. Our model is very different from the majority of the earned-wage models in both the US or across Latin America. Most of those models focus on charging employees every time they want to withdraw funds from their earned wages. We believe that is a faulty model because it basically charges the people you want to help. We have designed a card-based model. Instead of letting the employee withdraw funds from their account and charging them each time, our card provides them with that earned-wage access at their fingertips. That philosophy is what attracted investors to our company; the notion of an authentic belief in financial inclusion.

 

 

Q: What benefits do employees get by having a Castor card?

A: Liquidity. In Mexico, statistics show that 70 percent of workers live paycheck-to-paycheck and very few people have savings. Also, loans and credit are very expensive. When employees use our cards, the balance increases every day that they work and they can use those funds for transactions. What we have seen through our pilot programs is that these transactions are not the result of emergencies but for daily use. We are seeing the average transaction value fall as the number of transactions increases, meaning that our product is being used for day-to-day purposes. It provides employees with access to funds to go through their daily life without having to depend on credit products, which could easily plunge them into debt, or on loans that might charge higher interest rates. We are trying to control that liquidity. I refer to liquidity and not credit because we are giving employees access to the money they have earned and helping them control their finances so they avoid the slippery slope of credit, where they start spending more than they earn.

 

 

Q: Why is a service like salary on demand necessary and how should companies address the root problem, which is financial education?

A: Financial education is hard to promote through videos, webinars or articles. It is really more about creating products that help create behaviors that lead to improved financial habits and wellness. As an example, we’re trying to design our products so that users can see their financial stability increase as they rely on Castor to manage their expenses. By focusing on liquidity, we give them access to a controlled version of their funds so that they don’t lose control and find they have nothing on payday. We give people access to only a percentage of their earned wages. As they develop better financial habits, we increase those limits so they get better access. Similarly, another tool we offer relates to the notion of flattening expenses. As an example, if you want to pay your electric bill through Castor, instead of having to pay it all at once, we let you deduct it over four periods of 15 days each, for example. This leads to a more stable financial profile. You don’t have to self-manage. We simplify those decisions for you.

 

 

Q: How do you promote your services within Mexico, which continues to have a low rate of banking inclusion?

A: We have a variety of distribution models to get the product in the hands of workers. They can apply directly through Castor but we also partner specifically with companies that distribute our cards to their employees. Another distribution model that we are testing is integrating our product into payroll systems or with payroll providers where, regardless of the company, workers who get paid through those systems get access to and can use Castor. We are still experimenting across those three distribution models to see which works best in terms of allowing us to scale rapidly but in a healthy way to get to our goal of getting cards in the hands of 100,000 people by the end of 2022.

 

 

Q: Why is the culture of savings important for companies and individuals and what is Castor’s role in promoting it?

A: One of our complementary products is a savings tool. You can select how much you want to save and we withhold that portion of your pay, depositing it into a savings account where it gains a positive return of about 4.5 percent annually. We are trying to automatize that behavior so people do not have to worry about it. We all know how hard it is to save once the money gets in your bank account. The idea is that before it gets to your account, we put it in this piggy bank, automatically and seamlessly, so you do not even have to think about it.

 

Castor helps companies grow their money and reduce their debt. It has services in the area of ​​salaries, consulting, savings and installment payments.

Sofía Hanna Sofía Hanna Journalist and Industry Analyst