Pioneering Embedded Finance in Brazil: The Untold Story of Magazine Luiza
- Samridhi Singh and Sanjeev Kumar
- 5 mins read
- Embedded Finance, Partnerships
Table of Contents
Magalu Money Moves: How a Retail Giant Became Brazil’s Quiet Fintech Powerhouse
When people think of fintech in Brazil, Nubank and Pix often take centre stage. But what if we told you that a retail giant has been quietly transforming financial services for over 30+ years? Enter Magazine Luiza, or Magalu—a household name in Brazil’s retail sector that often flies under the radar.
Magalu’s fintech strategy is a fascinating case of embedded finance—a theme that we’ve recently explored in-depth in our Global Embedded Finance Report. This blend of finance and retail, or what Brazilians term “Fintail,” reveals how businesses are leveraging finance to unlock new value streams beyond traditional banking.
As the LATAM fintech landscape continues to evolve with innovative moves (as explored by us in LATAM Ledger – Key Moves from September and October), Magalu stands out as a unique case study. Unlike many fintechs that only recently emerged, Magalu has been quietly building its fintech roots for decades.
In our previous exploration of Toast, a vertical SaaS platform for the restaurant industry that seamlessly integrates financial products, and Apple’s ambitious foray into the embedded finance ecosystem, we saw how different sectors are adopting embedded finance to create frictionless experiences. Now, we turn our attention to Magalu—a company that’s been bridging retail and finance long before digital banks or wallets became trendy.
Let’s dive deeper into Magazine Luiza’s business model and explore how it blends retail and fintech to shape the future of financial services in Brazil.
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Reinventing Retail with Tech, Tunes, and 'Lu' the Influencer
Magalu’s journey is nothing short of a comeback tale fit for the digital age. When the Brazilian retailer went public in 2011, its future looked bleak, and by the end of 2015, its stock had plummeted by a staggering 94%. But in the same year, things took a turn, and its new CTO launched an e-commerce platform.
Take, for example, “Lu,” one of the first digital influencers created by a brand, who now commands an audience of 7.2M followers on Instagram. Magalu wasn’t satisfied with just traditional e-commerce; it pushed the boundaries of shopping, experimenting with experiences like streaming playlists, allowing users to buy the instruments they hear in the music.
Today, Magalu is more than a retailer—it’s an industry pioneer at the intersection of commerce, finance, and technology. By integrating financial services into its offering, Magalu is proving it can be a powerhouse in delivering products and transforming entire industries with digital innovation.
Inside the E-commerce Giant’s Financial Revolution
With nearly 50 million monthly active users and annual revenues in the billions, Magalu has recently expanded its fintech footprint. Beyond lending, the company has built a robust ecosystem, offering wallets, credit cards, and cashback solutions tailored to consumers and merchants on its online marketplace. The company has crafted curated financial products that serve individuals, merchants, and B2B financial institutions.
How is Magalu doing this, you ask? By deploying a multi-pronged approach through three distinct models: Build, Partner and Acquire. Let’s quickly spin through the major financial moves that turned Magalu into a Fintail powerhouse!
The Build-Partner-Acquire Strategy Powering Magalu’s Fintech Growth
- Build
Magalu made its first bold leap into the lending space in 1992 with consignment credit—a model where loans were distributed based on group contributions and a lottery-like system. This approach, although widely popular in Brazil, aligns with Magalu’s ‘Build’ strategy. Fast forward to today, and the company continues to evolve. Through Luizacred, it secured an SCD licence, and its BaaS arm, Fintech Magalu, now holds an ITP (Payment Initiator) licence, enabling the conglomerate to offer credit and open finance services.
- Partner
In 2001, the company took a major step by forming Luizacred, a joint venture with Itaú Unibanco. This enabled it to offer a full suite of banking services, including personal loans and credit cards. By 2005, it expanded into insurance through a partnership with Cardiff, a BNP Paribas company.
Magalu has strengthened its financial offerings by partnering with Visa to launch credit cards, complementing its existing Luizacred card. Recently, the company expanded into the Buy Now, Pay Later (BNPL) space through a partnership with Giro.tech. While instalment financing has long been a popular option in Brazil, BNPL is gaining traction due to its appeal of low interest rates, positioning Magalu to capitalise on this emerging trend in the market.
- Acquire
Magalu’s recent acquisitions in the infrastructure space have further accelerated its ability to offer “Magalu-as-a-Service,” positioning the company to monetize its technological capabilities. Through Fintech.Magalu, and a strategic blend of targeted acquisitions, Magalu has transformed into a unique player—an e-commerce giant seamlessly offering embedded banking services. This innovative approach sets Magalu apart, allowing it to offer financial solutions directly to its fintech counterparts.
Magalu’s Power Moves That Set a New Retail Standard
With these three strategic power moves, Magalu has redefined the standard for retailers entering the embedded finance space. By harnessing ecosystem synergies through well-crafted strategies and pioneering tech adoption, Magalu has positioned itself for significant growth. Its approach is not merely a blueprint—it’s a masterclass in transforming retailers into fintech leaders, unlocking fresh avenues of growth and paving the way for long-term success.
Magalu's Strategic Leap into Embedded Finance
Magalu Demystified: The Retail Giant’s Financial Side Hustle
When the fintech conversation in Brazil turns to innovators, Magazine Luiza (Magalu) often flies under the radar. However, with over three decades of embedded finance innovation, Magalu’s journey offers an unparalleled blueprint for how a retailer can evolve into a fintech powerhouse. In this playbook, we delve into how Magalu’s strategic trifecta of building, partnering, and acquiring blends commerce with financial services to unlock new growth avenues across credit, payments, insurance, and Banking-as-a-Service (BaaS).
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Authors
Samridhi is a fintech analyst within the WhiteSight team, researching fintech trends and providing insights into everything from new markets and investment opportunities. Just like she connects the dots to reveal the big picture of the ever-evolving fintech landscape, she has a keen eye for discovering the brushstrokes of Madhubani paintings and the contours of the hills.
Sanjeev is a fintech aficionado who loves to explore the depths of the industry as much as he loves to explore the depths of the ocean in his scuba gear. He is the founder and CEO at WhiteSight, bringing a wealth of research and advisory experience to the fintech world.
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