Credicorp Ltd. (BAP) Earnings Call Transcript & Summary

Hello. Good morning, everybody, and welcome to Credicorp's 2022 Investor Digital Day. Thank you very much for being here today. I am Milagros Cigüeñas, Investor Relations Officer. On the next hours, you will learn about our transformation story, our digital strategy and the new growth opportunities that we see going forward. On this slide, you can see the detailed agenda for today, along with the topics that we will cover. Now let me run just through a couple of details. After our management presentations, we will have a 10-minute break. After that, we will start with a question-and-answer session. We will begin with the questions of our audience here. And later on, we will move on to answer the questions that we will receive from the webcast. [Operator Instructions] Now before turning it over to Gianfranco, I would like to pass for a moment so you can review the safe harbor for this event. And Gianfranco, the floor is yours. Welcome.

Thank you, Milagros. I'm sure you're fast readers because if you read that safe harbor in that time, so well. Good morning, everyone. I hope both of you and your families are well. I'm really glad to meet you in person with all of you after 2 years, especially to see some familiar faces and also new faces today. I'm also very excited to share our vision for the future of Credicorp, including the progress on our group-wide digital transformation strategy and the work we're doing to continue to sell this wrap and innovate from my new position as CEO. Please let me introduce you the team that will be presenting today. Mr. Cesar Rios, our CFO, I'm sure you -- all of you know him very well. Ms. Francesca Raffo, who many of you also know. She's joining us today in her recently appointed role as Chief Innovation Officer at Credicorp in addition to her role as Deputy CEO at BCP. Francesca not only started but also has been leading the transformation program at BCP for the last 7 years. Today, she will explain her new role, our innovation framework and newly implemented governance structure. Mr. José Antonio, Toño Muñiz, who is our Head of Transformation at Mibanco, will discuss how we are rapidly implementing the very successful hybrid model at Mibanco, our microfinance subsidiary. As you may know, all of us -- the 4 of us have an average -- a 20-year tenure at Credicorp. We also have a couple of new phases today. I'm glad to introduce Mr. Raimundo Morales, recently appointed CEO of Yape, Peru's largest digital wallet. Previous to this role, Raimundo worked at McKinsey and his last role was as a partner, leading the digital practice for financial institutions in Spanish-speaking LatAm. He actually started that practice and has been involved in developing the strategy for many of the regions 'digital financial services ventures and worked with us at the very inception of Yape. Finally, let me introduce Mr. Adolfo Vinatea, Krealo's new CEO. Prior to joining Credicorp as Head of our CVC arm, Adolfo was a Director at Advent, the global private equity firm and a VP at Peru's Nexus where he was actively involved in LatAm investing. I am positive that the combination of well-seasoned Credicorp executives with a growing digital transformation track record and the top-notch talent we are incorporating is a key lever for successfully accelerating our innovation agendas. Since day 1, I've stated that digitalizing Credicorp has never been our final goal and that becoming digital is a means to an end, not an end in itself. And I have said this because I believe our digital strategy is fundamental to our goal of successfully executing our purpose, leaving our values and advancing toward the future guided by our North stars. And in this sense, aligned with our purpose of contributing to improving lives by driving the changes that our countries need, we are very happy to financially -- to have financially included 1.6 million individuals in Peru, Bolivia and Colombia through Yape, Soli and Mibanco Colombia last year. Nonetheless, there still remains a lot to be done. In Peru, 50% of the adult population do not have a bank account. And almost 90% of total transactions are still completed using cash. Innovation, new technologies and digitalization not only provide a huge growth opportunity, they are also key enablers to enhance the life of millions of people in the region while at the same time, expanding our markets in a profitable and increasingly sustainable manner. Although we tend to talk about innovation as if it was a new trend, let me share you with -- let me share with you a video that shows what that we, at Credicorp, have been innovating for over a century. [Presentation]

So how have we been innovating for so many years? By constantly challenging transforming and even disrupting ourselves. We have a culture of constantly anticipating our customer needs, even if that makes us uncomfortable or unsatisfied with what we do, where we are and how we do it. I was revisiting my notes from the presentation I made in this exact revenue for Credicorp's 15th anniversary more than 10 years ago. At that time, we were not in the microfinance business. Today, we have close to 30% of the market in Peru and over 10% in Colombia; nor we were leading in the SME business segment whose value proposition we redesigned completely and in which today we have a share of close to 40% of the market. More recently, we established that our real competitors in the payment business were not the acquirers of transactions, but cash. We launched Yape that had an obvious effect on the debit and credit card businesses, but more importantly, launched the noncash dramatically -- that noncash pie does dramatically. Today, Yape has more than 80% market share of total digital wallet payments in Peru. One of the key attributes we have developed over time is to continuously explore and learn, understand and adapt to fast-changing megatrends that could impact our customers and markets. Throughout this session, we will -- throughout this session, we will show you how we have developed our digital capabilities, what have we achieved so far and more importantly, the new governance structure we have defined in order to further ensure the execution of our innovation plan. Cesar will also explain how our disciplined decision-making process is allowing us to capture the digital opportunities in expanding our TAM and efficiently strengthening our operational drivers. As you may know, each of our lines of business started its own transformation process by itself. BCP was the first one 7 years ago, and we've reached significant milestones along these years. I'm convinced that this entrepreneurial and independent agenda has been the right approach to foster creativity and innovation. However, going forward, we're enhancing our ability to share our experiences, successes and lessons learned to optimize this process, capture opportunities, capitalize synergies and leverage the broad base -- customer base Credicorp subsidiaries have. To enhance our disruptive and entrepreneurship culture, while adding an extra layer of support to innovation, we've created 2 new governance bodies at the Credicorp level, the Innovation Committee and the BAP Innovation table, both led by Francesca, our recently named Chief Innovation Officer. She will explain both of them in more detail during her presentation. We also -- we are also further developing Krealo, our innovation arm, into a full corporate venture capital as our vehicle for outside in innovation. Both strategies are oriented to optimize the return on our innovation investment portfolio. Allow me to conclude by saying that by combining and enhancing our new ventures' cultures with our strength in digital capabilities, while at the same time, leveraging our competitive moats, we expect to unlock Credicorp's full disruptive, scalable and -- market expansion potential. Thank you for being here with us today and for those who couldn't make it, attending virtually. Now I will leave the floor to Francesca.

Thank you, Gianfranco, and good morning to you all. Thank you for coming here and for those connected to the webcast, thank you for connecting as well. So as you know, BCP led the way in the transformation journey. We were the first to really look at ourselves and say we have to improve customer experience. We need to work harder on efficiency and also pursue growth. But it's important to say that our other lines of business: Pacifico, Mibanco, Krealo and then Prima followed through this process as well, and they're still going through it. And they're doing it in the same manner we did by looking at customer needs and looking also at the changing competitive environment. So this is a process. It's not static, and it's constantly going. We have strengthened our 4 capabilities. Sorry, I didn't put it there. We've been working on strengthening these 4 digital capabilities. The self-disruptive mindset, very hard, we've made good progress; agile and focusing on user experience, very important for us as well; and building solid tech capabilities and also inquire -- looking for digital challenge -- talent, bringing it into the organization and also developing from within. The only constant around our business has been change, changing customer needs. Customers are continuously evolving, expecting much more from us bringing their experiences from other industries to banking and to financial services, expecting superior service, good transactions, 24/7 and a multichannel view and also changes in the competitive environment. We don't only compete with banks in Peru, in the region, but with fintechs, startups, insurtechs and so forth. And they are fast, they're nimble, and they also have different value metrics. So it's a challenging market where we're operating. This has led us to reframe the way how we think about our business, where we play and how we do our strategic view. We have an ambition to be giving customers much more access to their day-to-day in order for us to have a deeper relationship with them. We're doing it, trying to achieve a frictionless experience in order to win the war against cash. We also think we're able to provide a good experience for digital acquisition, customers buying products in a digital way, also developing strength around virtual assistance and giving customers tools for them to grow. Innovation is not new for Credicorp. You saw it in the video, Gianfranco talked about that, too. So let me share with you our past 5 years. In 2017, we worked hard to integrate the day-to-day and the cashless and we launched Yape. This was created by the innovation center in BCP and it's been growing ever since we launched it. By 2018, in addition to what you saw in the video, Pacifico launched, from the innovation lab, a Mi Espacio, a way for customers that have insurance products to interact with an insurance to know where the clinics are, where they could fix their cars and so forth. The innovation center allowed customers to purchase their products digitally. We focused on the more massive products, which are savings accounts, installment loans and also credit cards. By 2019, something that's interesting is that the lines of business began understanding that they had a role in the transformation, not just the labs. They took ownership of this. And we began doing working capital loans for SMEs in a digital way. Cesar will talk a little bit about how this has expanded our total addressable market. 2020, we start working around virtual assistance and advice. We launched Clara, [ Vida ], Andrea in BCP, in Pacifico and Prima. These are bots that help customers with frequent transactions and questions around balances, transactions, date and so forth. And BCP's Innovation Center has been working around Warda, a solution for customers that want to save and don't know how to really save and this gives them advice as to set savings objectives or maybe rounding up their transactions and put money into a different pocket so they can really get to a savings target by the end of the month, the year or whatever they want. So we have been exploring tools for growth in Mibanco as well. We've created an entrepreneur community that has a directory of suppliers and buyers and the bank there provides service -- besides service, security and also quality and they can also receive training. 2021 was no different in terms of activity. We focused on strengthening BCPs up because of the number of transactions we've been having and also scaling the receivables financing for SMEs. The innovation center worked to improve -- help people improve their credit score, which is a large pain for a big part of the population. CVC Krealo scaled Tyba, the investment platform and Mibanco scaled its hybrid model. So through innovation, we feel very proud that we fostered growth, we've gained efficiencies and we've increased customer experience. We have tripled the number of customers by giving them access to products -- to buy products and to transact since 2018. We have reduced the transactional cost by 60%, and we have improved our app rating to 4.2% in the past months from a 2.5 rating before. And Prima was able to close 15 branches by serving 100% digitally their customers in assistance. We have also made great progress against cash, 9 million customers from Yape as of February 2022. We've increased the number of activity by over 100x transactions. We've included 1.6 million people into the banking sector while improving also the NPS to 61 from 56 in the past 5 months. BCP's cashless payment volume has increased from 18% in 2019, 18%; to 41% in 2021. On the products sold digitally, we have increased 6x the products sold and gaining efficiency. For example, when we sell a credit card digitally, it cost us 1/3 of what it cost us to sell it physically. And insurance policies in Pacifico has increased also 18x in the past 4 years. In terms of digital advice, we've assisted 1 million customers having 3 million conversations with them on a day-to-day basis. By launching Tyba, we have tripled the number of customers in the past 8 months. So we are also seeing growth in the entrepreneurial community platform, increasing to 36,000 customers there, 2/3 of them are not current customers. So that gives us an opportunity to grow as well. And we're also scaling our digital bookkeeping tool, Warda -- sorry, [ Grow ]. Warda is the savings one. Grow and this is growing at a 10% rate weekly, so we're very optimistic with those growth rates as well. All this has been -- we've been able to do all this because we're focused on culture and abilities, skills, agility and technical. Embracing agility has given us improvement in our time to market of software development. We are now able to produce software in 3 months. Before, it was 6 -- between 6 and 18 months. And we've been able to do this as well as reducing 13% the FTEs after redesigning teams around agility. To improve our competence in terms of talent and also the retention around talent, we have created a focused team on digital talent. They developed recruitment capabilities, training capabilities, retention and also developing their careers in the corporation. One example of this is [ Ventiv ] is our way of recruiting. We have a hub in Madrid that recruits analytical talent and is looking specifically for people with analytical skills abroad. We also like to partner. We're partnering with MIT, Professor Bertsimas, for example, to increase our optimization skills, and we find a large opportunity in the [ ALM ] of PEN 120 million before tax to be implemented soon. We have also focused a lot around new talent skills, building superb IT analytical pricing UX design, agility and so forth. And we work very hard around the performance mechanisms that we need to have to deliver value and also the metrics that we look at quarterly. Now I would like you to see a video from our 3 tech leads, the 3 wise men that you will see there and how they're viewing our advance in these capabilities. And right after that, I will leave the floor with Toño, so he can show you an example of Mibanco and how we've applied these principles to really gain productivity. [Presentation]

Good morning. How are you? My name is Toño Muñiz. I'm the Head of Transformation in Mibanco. And today, I'm going to show you how we are evolving our model using different digital capabilities. As many of you already know, Mibanco clients are mostly from the most economic -- vulnerable economic segment of the population. And primarily, they are micro and small businesses. To give you a sense of our impact, we are the leading group in microfinance in America and the second largest bank -- private microfinance bank in the world. We see ourselves as a vehicle to help our clients exit from poverty and from vulnerability. And we see in digital, a good option to foster that exit, reduce our cost to serve and reach more of the market. Our typical client, they do not use the banking system. They don't save in banks. They live in a pretty much cash economy. So and -- but they really put a high value in personal relation. They need a companion. They need advice, they need education to fulfill their dreams and improve their ventures. But we also see a big opportunity in digital since 77% of the clients already have a smartphone. So we have to tap that power there. By the end of 2001, we have nearly 2 million clients, 25% of market share in Peru. We helped more than 77,000 persons be included in the financial system. 46% of them are women. And also, we brought financial education for more than 145,000 of our clients through our RMs and our digital platforms. The traditional model in microfinance is based 100% in people. The RMs are the ones who have to walk, visit the clients, take the increase, make the risk assessment and collect the installments when they are past due. We calculate 25% of the time is wasted just in transit. And also, this segments, they have a little small ticket for each loan. We're talking about $250, $300 per loan. So they are based in a high rate -- high interest rates. And that's because of the inherent risk of the operation of the segment and to cover all the operational expenses. So as you can imagine, this is a really expensive and inefficient model. You need -- in order to reach more market, hire more RMs and increase your footprint. So several years ago, we conclude that this model, although was really successful is not sustainable to go over and over in time because -- or due to the competition from incumbents and new players as fintechs and also because of regulatory pressures in the interest rates. In this scenario, we saw digital as the one optimal way to keep going and fulfilling our purpose and helping our clients to exit vulnerability. So we moved to a hybrid model, which is based in 3 main capabilities: centralized risk assessment, which we think is the heart of our transformation and the key part that you need to do this hybrid model; then digital sales and multichannel approach; and focus on customer relationship building. The RMs are still part of the equation, and they are in the center of the relation with our clients, but they are adding value with each touch. And the focus is around the RM to reduce the time that they waste and have a more cost-efficient way of engaging with clients. The first and most important, as I told, the heart of this new model is the centralized risk assessment. So the idea is not to depend of -- from the RMs to do the credit assessment. Also, we have more predictable delinquency rates, we can better focus our commercial efforts, and we are able to use alternative sales channels. That's because we have a lot of preapproved offers for our clients. And in 2021 was a good year for this. We multiply by 3 the number of leads that we can generate or centralize, and we multiply by 4 the preapproved offers to our clients. And that gave us that -- by the end of the year, 74% of all of our loans were based in a centralized risk assessment. We also began to leverage different capabilities that we already built for our RMs. The idea is to take off a lot of the time, a lot of the transit time, a lot of the waste in type of the RMs in their relationship with our clients. So we work in different things, and we have already created an internal app that our RMs can use in the field to prospect clients and seek for the most valuable clients or the ones who need a credit. Then we are using WhatsApp to move the documents between clients and RMs, so we don't have to make the RMs go back to the branches with the paperwork. We are using also Teams or Zoom meetings to have the risk committee. And we are implementing virtual desk in the cloud, so our RMs can access to all of the bank services and all of the information from the clients in the field or wherever they are. We are also working in developing our app and we are trying to increase the use of it. Although contracts now still need to be physically signed in our branches, we are building to have these digital signature capabilities. All of this, like, the 3 main capabilities and all these, let's say, gadgets around the relationship from the RM with the clients, it has a lot of potential that show a lot of potential. So the last year, 44% of all of our disbursement was made through alternative channels. We could reduce -- we reduced 14% number of RMs while we are increasing 15%, the loading of their portfolio for each RM. We have improvement in NPS. And we have 125% increase in the users of our mobile banking app. To give you an idea, last month with disbursed 19,000 loans through our app. Finally, our intention is to keep seeking out alliances or way to use our hybrid model. So we are going for the ecosystems. We'll leverage some of Credicorp's ecosystems like Yape or Culqi. And to give you an idea, last year, we brought 155,000 clients into the digital payments through Yape. Also, we are making alliances with companies such as Uber or Alicorp. And these alliances are based in sharing data of our customers so we can improve our risk models and then use it to better serve the common clients. And finally, we're creating Yevo. Yevo is our digital platform that we are bringing a lot of services and digital capabilities to our clients so they can have a better digital view of the things and they can access different services to improve their entrepreneurial ventures. So -- well, I think -- sorry, I was going to do your part Francesca. So thank you very much, and I will leave the floor to Francesca now.

Gianfranco mentioned at the beginning of the presentation, we've also been moving towards the new level of innovation at Credicorp, not just on the lines of business, but at Credicorp [ view ]. So to do this, we've created the 2 governance models: the BAP Innovation Committee, which is composed of the CEO, the Chief Innovation Officer and also the COO, but also has members as the CFO, Krealo's CEO, other lines of business members and most probably external advisers as well. The main role here is to define Credicorp's ambition and mission around innovation. What domains we're going to play in, how we're going to play in and what geographies we're going to go in and how we're going to do that. And also set the funding for this and give the lines of business and the different labs and Krealo a clearer direction into where to play and how to play. On the other hand, the other governance model is the BAP Innovation Table. Here is where we think that sharing of what each of the lines of business and their labs have done is very valuable for the teams. And also, there's a lot of value to be gained in cross pollinization sorry, cross-pollinization of the ideas, the methods, the technology that each of the labs are doing. The work we've begun, because this has just started in February, around the domains, we're seeing a very clear vision around payments, neobanks, lending, acquiring value-added services for SMEs, insurtech, wealthtech and also leaving a space for what we haven't seen yet which are new trends that are coming out in the market. Now I would really like to finish the presentation with introducing the 2 next guests that I think is very relevant. First, you're going to see Yape with Raimundo, which is a clear view of how we're looking at innovation at Credicorp from the inside out. Something that spurs up from pains, from things that we need to solve in each of the lines of business that build them in the innovation center, so they're lines of business as well, but grow up to be huge, nice businesses as Raimundo will show. And the next one is Krealo, our CVC, which is really its main goal is to bring innovation from the outside in and really disrupt ourselves, bring challenges and talent and so forth. So Raimundo, thank you very much, and I'll leave the floor with Raimundo.

Thank you, Francesca, and good morning to everyone. So as Francesca mentioned, I recently -- and Gianfranco, I recently joined Yape. Before talking a little bit about Yape, I want to share a bit why I'm here, why I joined. Well, first of all, Gianfranco and Francesca made a crazy decision to offer me the job. But -- no, speaking more seriously before Yape, I used to lead our digital practice in McKinsey and working with financial institutions in the region. And doing very similar work, including the starting of Yape 4 or 5 years ago. But I saw Yape kind of as a benchmark, as the role model of what incumbents can do to disrupt their markets. And so when this opportunity came, it was very difficult to say, no. I mean this was really, I mean, what -- the position, today, Yape has is quite unique in Peru, but, I also think, in the region and I'm convinced of the huge potential we have here. So that's a little bit of my personal story. For those who don't know, Yape is a digital payments wallet similar to a Venmo in terms of functionality today, which is significantly disrupting the payments ecosystem in Peru and -- which, as I'll share later, is -- we're expecting to become the first super app or the digital ecosystem in the country, and that's what we hope to evolve. So as Francesca mentioned, Yape was built from the inside out, right? In 2015, the banks had its first digital playbook with 6 clear plays. The second one actually was become a leader in digital payments. Again, this was 2015. Venmo was just kind of starting. It wasn't so clear. And we did this visioning -- actually, I'm somewhere in that picture because I was working with the bank on that. And we define, okay, let's do a really transformative different solution. And we started from there, launched MVP, University students and started growing within the bank. And this is very important because, I mean, we've learned through the years this delicate balance on how to leverage BCP to gain scale. I mean, Yape wouldn't be in the position it is today if it wasn't part of BCP and it wouldn't have leveraged the growth. But we also had to learn how independent you have to be so that being part of BCP doesn't make you slow. So that is kind of the path we are navigating and one we continue to navigate, but that has allowed us to reach the success that Yape has reached today. Here are some numbers I'd like to share. First, in number of users, I mean, I would -- we have 8 -- this is as of December 2021, we had 8.4 million Yaperos. We continue growing at around a bit more than 250,000 users a month, so we're close to 9 million right now. But something I want to share is we don't measure market share. We measure penetration of the adult population that has Yape. So our key figure here is in Lima, 60% of the adult population in Lima use Yape. In -- and in Peru, the total is 40%. And we have an ambition to take that to higher levels and be clearly the payments network for Peru. If we compare, just to give some sense of numbers and these are Yape numbers as of December, and we've used 2 comparisons, using public figures from interviews and that we've triangulate it a little bit. So Niubiz is the traditional acquiring -- it's used to be called VisaNet, but it's basically the largest acquiring network in Peru. And PLIN is the equivalent of a sales solution in Peru focused on -- launched by our 3 biggest competitors in the market. If we look at numbers of merchants today, Yape has 1.6 million small merchants, small businesses, micro-merchants, et cetera that use Yape compared to the 500,000 that a Niubiz or a more established player can be. In terms of transactions, in December, we did 58 million transactions, which was more than Niubiz. We've actually crossed last year in terms of transactionality and was 8x PLIN, which is the sum of our 3 competitors, it was almost 8x. And the most relevant figure this is not only microtransactions, it's smaller transactions, but in terms of absolute amount, PEN 3.7 billion were transacted through Yape in December, which is a really relevant figure. And when we compare to other channels, the bank, et cetera, it is becoming very important. Now we've achieved that, at the same time, with a very -- I think these are the -- one of the most important numbers in the chart with a very highly engaged client base. So out of those 8.4 million clients we had on December, Yaperos, we have 4.5 active and active defined last 30 days -- that have used Yape in the last 30 days. And those Yaperos, which today are 54% of the whole client base, before it was 28%, use it on average 13x a month. That is more than the -- our -- BCP's credit card users who use their credit card a month. So this is very highly recurrent, frequent users. This allows us or takes us to having almost 1.3 million users that log in to our app every day and over 3 million sessions. Actually, that number has also increased by over 3 million sessions every day in the app. Also, Yape has served as the main vehicle for financial inclusion in the country. Two years ago, we measured those 10 million of unbanked population based on the Census data, et cetera. And we started setting a goal and measuring how many of those people were we able to include financially through Yape, being Yape their first bank account or their first transaction accounts. As of December, we had 1.6 million Yaperos, financially included. And again, this is growing at a little bit more than 100,000 new financial included per month and continues to grow at that rate. And I'd like to share small video -- a short video on Yape so that you can get a sense of what are typical -- who are typical Yaperos are and how this is changing communities around Peru. [Presentation]

And before going to our next page, which I'll talk about our evolution to a super app, I'd like to leave 2 very relevant facts. Today, in Peru, the third most recognized digital brand in the country is Yape. So only -- I mean it's WhatsApp, Facebook and then Yape in terms of -- to... Second, Yape, today, is a verb. So [Foreign Language], it's common language in the country. So instead of pay me, it's [Foreign Language]. So that's the level of penetration and usage, the adoption that Yape has achieved. So with that, we do believe that we have a quite unique asset that would allow us to build -- our vision is to build or convert it into a super app and build the first true digital ecosystem in the country. And we see kind of 3 business lines. The first one, the -- continue our current business of being the largest payment network in the country. We have an aspiration of 10 million active Yaperos, and PEN 100 billion a year in transactions. We expect that we would achieve 30%, 40% of those who we'd will be able to charge some sort of MDR or fee on this transaction level as we include more sophisticated merchants or people that are using more given the -- what we've done. The second is how do we evolve to become present beyond payments. So we -- through partnerships, we want to build the first or the largest marketplace or e-commerce in the country to be able to bring the best offers to our Yaperos and solve their daily needs. And this -- we're talking to a number of companies and working on those partnerships. And finally, we want to be the channel to solve multiple financial needs of our customer. Distributing Credicorp products, innovative products, loans and different assets. Our aspiration is to have at least 2 million Yaperos with the financial product in the next years. And that is kind of the level of aspiration. To do this, as Gianfranco mentioned, we have, today, an independent team. I have an independent board, but we're increasing that independence, giving more flexibility, start measuring Yape differently and separate it from the bank. And why do we think we can achieve that? Our first product is mobile top-ups. Mobile top-ups is, in Peru and a lot of developing countries, in the phone industry, most of the phones are prepaid phones. So it's a pay-as-you-go system. We put that functionality -- in Peru, it's like a $1 billion market, the mobile top-ups, a year. We put that functionality within Yape. It's still a bit hidden, because you have to go into this menu then you have to put [Foreign Language] and we were trying it out. So we put this functionality towards mid-November. And within 3 months, we've achieved -- we have 5% of the total top-up market, which the top-up market is, I would say, 60% or 70% a cash market, where you go to mom-and-pop and you recharge your phone. We have, with some effort, with some new [ stations ], we already have 5% of the market. Our aspiration is we should be able to have 20% or more of that market in not so long. And this is a simple example, today, -- we have 700,000 clients that have done a mobile top-up and that -- those clients, on average, have done 3.5 mobile top-ups a month. So just 1 product, which is kind of the tip of the iceberg is generating, on average, those clients, 3.5 more transactions per month. It's generating an income. We get high single-digit fee for the value that top-up has generated. And it's kind of our first example of in connection to selling things within Yape. What we are going to do is evolve that significantly in the next months towards Q3, Q4. We will launch a whole new look and feel of Yape, where we will have functionalities around these new verticals or business lines. So you will be able to find offers. You would be able to find financial offerings and products and services that will sell through Yape. So that is a little bit of the evolution I wanted to share on Yape. And now Adolfo -- let me hand the floor to Adolfo who will talk about Krealo.

Got to take the cheat sheet. Good morning, everyone. I'm Adolfo Vinatea, CEO of Krealo. I joined Credicorp around 8 months ago, and we've been working really hard under the hood to present this new evolution of Krealo, which we call 2.0 and really happy to be here today. So let's get started. So Credicorp was actually very early into the Andean region VC ecosystem because Krealo was founded back in 2018. And after several years of experience in learning, Krealo is evolving today, as Gianfranco mentioned, to be Credicorp's corporate venture capital arm. And CVCs are, as you all well know, have become very common in the market. Every group uses them differently. In our case, we've recently redefined our purpose, which is to identify, screen and invest in opportunities that complement current and future lines of business by building or acquiring new ventures. And most importantly, we seek to create both strategic and financial value. Krealo seeks to invest where Credicorp can actually deliver on that promise of being more than just money. So what we're looking to do is invest where we can create real value and reap strategic and innovation benefits. So what we're going to do initially is have a targeted approach. First of all, we're going to invest in the Andean region, where we have a proven network and we have market knowledge. And additionally, we're going to be investing in fintech and in adjacent segments, for example, providing loans via an e-commerce platform. And this is really going to allow us to play to our strengths. As we seek to disrupt our traditional lines of business and as we invest in this broad range of fintech subsectors. This is not a complete list. And of course, it brings innovation and future pools of revenue to Credicorp. Now Krealo already has a significant track record of investing in growing ventures. And this is a great foundation from which to launch this new CVC phase. Over the years, this experience has yielded very important learnings. And this is, of course, a foundation for what we hope is going to be our future success. An example, just late last year, we actually exited an underperforming venture for the very first time. And we think this is an important lesson in terms of the mentality of learn fast, fail fast that we need to have in order to be successful venture investors. Very quickly, our portfolio today has 4 companies from which we're launching this phase: 2 are consumer-facing and 2 target SMEs. We have Culqi, which is a pay tech company in Peru that was initially focused in the online segment, and now we're helping enter the physical realm to be a true omnichannel solution. We have Tyba, our digital investment platform that is already recruiting thousands of new investors across the region. We have Tenpo, our neobank in Chile that's creating a great disruption in the market. And we have Wally, which is a SaaS ERP software for small business owners, so we can help them run their business better. And with this new purpose and aligned with Credicorp's digital strategy that Francesca and Gianfranco mentioned, we are now seeking new investments in order to grow our portfolio. So our value proposition, and we have 2 main stakeholders here. First is, of course, Credicorp, but also, equally importantly, is the ventures that we invest in. So how do we create value for Credicorp? So we've identified 2 plays. First is that we're going to boost Credicorp's current businesses by investing in disruptive players that can really drive innovation and complement our product offerings. And second is we want to identify the business models of the future. Switching to ventures. Our operational model has 4 ways of creating value. First, we provide the ventures with the independence they need but at the same time, provide them support from Krealo's team. Second, and although many say this, we are a true long-term strategic partner in the region. Third, given that our are strategic -- our objectives are strategic, we have flexibility in deal structuring to see what fits in each case. And last but not least, we aim to leverage Credicorp to help our ventures grow faster. So let me use some examples to better explain. Tyba is a great example of how we can boost our current Credicorp business. In this case, it's Credicorp Capital. And Tyba launched this great digital investment platform, and this allows small ticket investors to quickly access a range of Credicorp Capital's financial products. Most -- I would dare say, all of Tyba's clients would never have been normally a Credicorp Capital customer as well. So what we're doing is we're increasing the addressable market and at the same time, fostering financial inclusion with this low-cost alternative. And Tyba's agility is allowing it to quickly roll out into new markets and also launch new products, like, for example, we're going to be launching regionally this year, our international stocks and crypto offering, which is a first for Credicorp. He's a short video from Tyba's CEO Valdemaro Mendoza for some more detail.

At Krealo, the Credicorp corporate venture capital, we seek to create strategic and financial value investing in start-ups and fintechs, Tyba is a success story that demonstrates how we complement Credicorp LOBs with disruptive ventures. Tyba's CEO, tell us about this journey.

Tyba is a digital investment platform. It offers people in Peru, Chile and Colombia, the possibility of investing digitally in funds, stocks and cryptocurrency from less than $35. The solution is 100% digital. Leveraging the fast onboarding process, users can start investing in less than 10 minutes. We complement Credicorp Capital businesses by offering their investment products to a new fast-growing segment of clients for a completely digital experience. We have also leveraged Credicorp Capital regional platforms to rapidly expand, having opened in Peru and Chile in the second half of 2021. And now with Krealo's support and know-how, we are innovating with an ambitious international stocks and cryptocurrency product offering that we will launch during 2022. Tyba has been able to rapidly scale to almost 100 million AUMs and over 50,000 clients across the 3 countries in a short time. We look forward to more than doubling the number of clients in 2022 as we continue to grow with the support of Krealo and Credicorp.

At Krealo and Credicorp, we are identifying opportunities to provide customer-focused solutions. Tyba is a very good example.

Krealo has a regional mandate. So Tyba was launched in Colombia. And now for the second example of creating new businesses from Credicorp we'll move south to Chile, and we'll talk about Tenpo. And Tenpo has been a great success so far. Credicorp had no retail banking presence in Chile. So Krealo launched Tenpo, in order to disrupt the market and traction has been really impressive so far. Actually, just this month, we're crossing the threshold of 1 million registered clients, and this is more than triple what we had at the same time last year. The team has also been really busy in terms of product. They've already -- surpassing more than 12 different product offerings. So they've become a true neobank that are disrupting the traditional players in the Chilean market. We have very high ambitions for Tenpo first in Chile and also in the region. And in order to see a bit more detail, let me leave you with Fernando Araya, Tenpo's CEO in a short video.

As another evidence of our strategic value for Credicorp, Tenpo is a story that successfully demonstrates how we create new business opportunities.

Tenpo is very well positioned to become the best neobank in Chile under the value proposition of democratizing finance. We place the everyday finance of people on the loop by the financial [ they receive ] in the palm of their hands. Our current solution competes with the value proposition of traditional banks in the Chile market. That places Tenpo as one of the preferred options. We have successfully led Credicorp entry into the retail bank segment in Chile by opening a new market with a competitive and disruptive business model. Krealo's support has been key from the initial company building process through expansion with M&A as today's form. We will soon launch an ambitious credit card product during 2022, a payroll account, an insurtech offer as well as SME solution to complement our 12 existing products. By leveraging our agility and disruptive mindset, we have become the fastest growing neobank in Chile, having just reached 1 million customers. We hope to double that this year and expand regionally.

At Krealo and Credicorp, we are revolutionizing everyday finance. Tenpo is a great example.

As you see, we're super enthusiastic at Tempo. We love it. And this is a great segue for our value proposition in terms of our ventures. And the first topic I'll leave you with is independence. So we -- and this is very important, we give ventures management the independence they need in order to remain agile and disruptive. But at the same time, we promote strong governance via our ventures boards, and we attract top global industry experts to advise our CEOs. At Krealo, we have a team of functional experts in core areas of expertise for typical start-ups, in cyber, in data, growth, talent, finance. And this team provides consulting and monitoring support as our teams mature and grow. Second, we are a true long-term partner, and we're willing to invest over the long haul over multiple cycles of growth. This allows us to build conviction, and we're there to create long-term value. While we don't have a specific time horizon to divest our portfolio, we have introduced a concept of exit, which we call graduations. And the idea here is that after a certain number of years, we expect our ventures to graduate from our support system because we've helped create strong management and very healthy business models. And what this will do is allow Credicorp to find which is the appropriate place for the future of these ventures. Whether it be within a line of business, it could be to create a whole new line of business or we could even exit to the market if our strategic objectives have already been fulfilled. Third is our flexibility in deal structuring. And here, our priorities are strategic. So we really don't have the confines of a typical VC fund, and this allows us to find a deal structure that can fit in each particular investment case. We've invested so far in minority positions, in majority positions. We've grown via add-ons. The common denominator is that we are active investors seeking to obtain innovation and strategic value. We're never going to invest where we're just backseat spectators. And additionally, given Credicorp's ambition, we do have the dry powder to invest in a wide range of ticket sizes. And this ensures that we can accompany high-growth ventures through multiple cycles of growth. And fourth and definitely very important is how do we leverage Credicorp to help our ventures grow faster. And here, this is very important because we aim to build the investment thesis that can leverage one or more of Credicorp's strengths, and this would allow us to build true competitive advantages in our portfolio. So we've defined 5 pillars for leveraging Credicorp and those 5 are partnering with our lines of business, our financial expertise, our regulatory expertise, our relationships and distribution channel. So I will show you each one with a few examples. In the case of partnerships, our ventures are running around Credicorp, seeking new business opportunities on multiple levels. And one example could be a recent merger that we've just done with Wally and [ Grow ], which was free bookkeeping software that was incubated and grown out of one of BCP's innovation labs. And we're merging that into Wally to become Wally's free tier and to have a better value proposition for customers increase our addressable market and grow faster. So that was a great example of collaboration across multiple Credicorp companies. Second, financial expertise. A quick example here. is leveraging BCP's credit card experience in Peru in order to advise the team at Tenpo, who are developing a similar solution in Chile. Third, regulatory expertise. And here, I can briefly mention Tyba, who are really, really using Credicorp Capital's regulatory experience and licenses. And this has enabled them to grow from Colombia to both Peru and Chile just in the second half of last year. So there was a very important growth there. And fourth, of course, is relationships. And here, we can leverage them on multiple levels. And another quick example could be, we've attracted Alicorp, which is one of the largest consumer goods companies in Peru to be on the cap table of Wally and we were partnering with them so we can better serve SMEs in the country with this SaaS solution. And fifth and maybe most important is distribution channel. And here, we're trying to use this both ways. So on the 1 hand, we're selling through Credicorp. So an example is our pay tech company, Culqi, leveraging BCP and Mibanco's unique footprint in Peru to gain customers. And this is a great competitive advantage for scaling. And conversely, we can also sell Credicorp products via our venture portfolio. And an example here could be, for example, selling Credicorp Capital mutual funds via Tyba's app. And of course, in the middle is the transfer of data and better understanding our customers, which is a great advantage and lever for the whole of Credicorp. So as we enter this new phase with Krealo, we aim to expand our track record of creating strategic and financial value for Credicorp by investing in more ventures and creating great businesses. We believe we have the ingredients to become one of the most relevant players in the Andean regions venture ecosystem. And at the same time, serve a strategic purpose for Credicorp by bringing external innovation, by boosting our current lines of business and by also identifying the business models of the future. So with that, thank you very much, and I'll hand it over to Cesar.

Thank you, Adolfo. After talking all the -- about all the interesting and exciting parts. It's my turn to talk about probably the more spiritual one that is money. As we have seen during the day, the digital transformation is really key for us to live our purpose and achieve our very ambitious North stars. From the beginning of this journey, the digital and cultural transformation, we were very conscious that we have not receive a plan check to indefinitely sacrifice short-term profits in order to build value into the future. To do that, we have created a very robust governance system that allow us to make decisions with 1 firm foot into the presence and manage the situation now without looking at the perspective that is needed to be innovative and to invest in the transformation and the disruption initiatives that you have seen. In order to do that, we have been working in different dimensions, agile system that allow us to manage projects with different levels of uncertainty from the very certain traditional to the most uncertain with appropriate rules set up long-term OKRs that align the organization and have clear rules to cut losses when we are conscious that the venture is not going to be successful, and we need to move forward. And we have done that in Krealo and internal initiatives inside of the company several times. To manage that, we have developed a system that maintains tight control of the operating operations and look forward for the more transformational ones. For example, in the case of BCP, at the same time that we manage with disciplined P&L in terms of segments, subsegments, channel, products, we have developed an OKR system with QBRs that are conducted with a lot of discipline that allow us to monitor carefully, in the case of BCP, for example, more than 400 tribe-specific OKRs, validating the alignment and direction with 7 top of the house long-term OKRs that guide our strategy. Now we are in a moment in which we need to complement this robust system with the new governance that has been already laid out by Gianfranco and Francesca because we are going to accelerate significantly the investment and expenses, building the disruptive vehicles that we already have and the other ones that we are envisioning. So it's a momentous time to complement this robust procedure with new ones that allow us to complement the strategy, drive it through and build better business into the future. All of this is based on a solid foundation on a capital base that will allow us to withstand that it has been in the past, even the strongest storms that we have been seeing in the last years. Credicorp has been able to produce solid returns to the time, both in favorable time and in challenging times. As you can see in this picture, we have been growing our profits through the time with different levels of economic growth uncertainties. I would like to make a special mention to years 2020 and 2021. It was pretty severe. Our main operations are in Peru. In Peru, we suffered an 11.3% decrease in GDP in 2020 with the lowest interest rates in history. At the same time, we -- with a lot of confidence in our strategy and the fundamental strength of our businesses, we decide early on in year 2020, that was not the time to go back, but to invest more aggressively in the capabilities that were needed to build the future. We invested in an accelerated investment and transformation, in the disruption that we have been seeing. And we have been building through this crisis. As a result, you can see as was evident in our last conference call that in the second half of 2021, we have recovered profitability. At the same time, we have strengthened our business. It looks like our decision were spun on because after the crisis, we have some operational figures that you can see that, that confirms that we have strengthened our business. At the same time that we doubled the expenses in digital capabilities and resources. We increased our client base significantly multiplying with 1.5x, more than doubled the number of transactions. And very importantly, for the future, we increased our deposit base that is going to be a very solid foundation for the future. Okay. Continuously, what we are trying to do is to expand our TAMS to fortify our business and create new ones. I would like to use one very concrete example to explain how are we doing this. I am going to use the example of the FX business in Peru. The FX business in Peru is a fundamentally challenged business and it's going to be a fundamentally challenged business. Why? Because the Central Bank is truly committed to de-dollarize the economy. They think and I think they are right that to manage better the economic variables of the country is better to operate in soles than in dollars. At the same time, we have a long-term trend of decreasing levels of foreign investment. That's probably temporary, but this is a headwind. And additional, it's a very profitable business. So we have a plethora of fintechs competing with us. Relevance, there are around 40 at this moment in the country. And for the big clients, we have the international platforms that try to capture the business of the corporate clients. So a fundamentally challenged business. How we tackle that? Using 3 kinds of elements: first, leveraging transversal capabilities; second, working with a specific business-aligned capabilities; and third, disrupting ourselves. Allow me to explain a little bit about that. In terms of leveraging capabilities, we are -- we have been developing a very robust data lake with a lot of data. And with this capacity, we are able to model the behavior of the clients with great level of detail. With this, we have built a pricing system that allow us to produce the better offer for a client based on the profit of -- or the per [ fill ] of the client, the size of the transaction the channel used, the time of the day, the volatility of the moment and so other variables, coupled with integrating this powerful offering with distribution channels, integrating the FX as a feature, a characteristic that enrich the relationship through other payment process or active or passive process. So central intelligence deployed through products that are specific tailored to the FX, complementing other ones. And third, and very importantly, we challenge ourselves creating [ Cocos y Lucas ]. [ Cocos y Lucas ] is a fintech that has challenged us but has bring a lot of value because has displayed a lot of needs, has allowed us to challenge and prove concepts very fast. And as a result, they have acquired new clients and dormant clients. As a result of that, after this period of time and in a challenging environment, we have increased the TAM, the total market, doubling the number of retail clients and increasing profits in a context that is challenging. We use this approach for our entire portfolio. This is not exhaustive, of course, but gives you an idea that how we see this strategy. In this graph, you can see 3 kinds of capabilities, transversal capabilities, business-specific capabilities and disruptors. In the case of the transversal capabilities, all the business can leverage this in terms of data modeling capacity analytics. In the business specific, we developed solutions that's suitable for any specific business need, channel, product and so on. And third, the business are in the disposition to be challenged and fundamentally challenged internally or externally, for example, in the case that I mentioned previously of [ Cocos y Lucas ]. Allow me to review a couple of examples of this. In the case of wholesale banking and payment platform. BCP has been, for many years, the payment hub of Peru in the retail part and the wholesale also. In the wholesale part, we have relations with a number of corporate clients, big clients that they have connections with their own clients. But we have enriched this relationship with host-to-host connections, with APIs that allow us to connect very rapidly and enrich the capacity to these clients to collect from a vast array of other clients. So we can create an ecosystem in which the money flows from the individuals to the small companies, to the big companies. Everybody gets a benefit. And for us, there is a lot of benefits in this world of cash that Gianfranco has mentioning because the money flows with this pocket to the other one, good for us, good for the clients, reduce our cost, increases our floating. Another example is, for example, bancassurance. Bancassurance has been very successful. But now we can, working together, develop new products has been mentioned, for example, an oncological indemnity product that we develop specific, of course, certain channels, and we use the distribution capabilities of BCP or Mibanco to enrich the experience, to offer these products to people who have -- would be benefited from this kind of support in other circumstances. So as a whole, what we have is an ecosystem that leverage certain capacities for everyone, develops these specific capabilities and the disruption is also there to create new markets or [ trial our long hours as ] when this is the best suitable strategy. To do that, we have made significant changes in our cost base. If you see the top line, we have grown our cost base during this period in 6.4%, but it's more important what happened in the interior. At the same time that we have maintained a tight control over the traditional expenses that supports a strong and growing business, we have shifted the resources to increase our expenses significantly in IT and transformation capabilities to mention all these IT platforms that we are working in new teams like cyber security, strategic design, analytics, a number of ventures that we consider in this bucket. And at the same time, we have been accelerating the investments in the most disruptive ones that are in the 4 buckets. And the change -- the speed of change is increasing significantly now. During this period, the income grew at a slower pace, 4.9%, mainly during year 2020. As a result, our cost-to-income ratio was reduced, but we are convinced that this is a temporary and manageable event and doesn't impede at all our capacity to grow faster and to build value into the future. In this page, what we have is a very brief summary of the capacities that we have been building in terms of people who can innovate with IT capabilities that has -- bring us a result, a significant increase of the size of the business and the potential business. The number of banking clients, the number of transactions and modifying our cost structure that is going to be extremely value into the future. With this, we have created a strategy that has 2 basic main approaches. One that has been already laid out is to expand our TAMS, working in the adjacency of our business using internal capabilities, a new one that we are having to increase the potential markets. One clear example is lending. With preexisting capabilities, we were able to go to a certain number of clients, but we increased the capacity to model client behavior. If we increase the capacity to model the risk, if we increase using, for example, the Yape data to contact the client not only to sell, but also to collect because we have a client that has contact with us 13 times by sure because it's using the fund we can do things that were not possible into the past. And this logic applies to expand our portfolio, and we have different examples of that. The other part of the equation is to access and create new market opportunities. For example, we have been hearing about Tyba that gives us access to the investment retail market in Colombia or Chile that we are creating a new bank. Accessing these markets with traditional tools would have implied significant investments or a premium price acquisition, and we are building these capabilities within. As a result of that, I would like to share with you a longer-term perspective. During this process of transforming the institutions and creating new capabilities, we have -- go through several phases. From the beginning, I will say to 2019, we were investing heavily in new capabilities, but the business was growing and the income was growing at a similar pace. So we were able to maintain this level of investment without deteriorating cost-to-income ratio and what particularly the strategy invest for the future, being disciplined with the current expenses, maintain the cost-to-income ratio and build the business. During the second phase that I already explained, we decided that the right strategy was to accelerate expenses building the future because the opportunity was there sacrificing cost-to-income ratio and having some impact, of course, due to the other risks and factors that we are all aware in terms of profitability. Now we are in a recovery process. We have already provided guidance for year 2022 and what we expect in years 2022 and 2023 to have more or less the following: A significant increase in income because the business are recovering, the interest rate are coming back to a more normal or even a little bit higher levels. We are expanding our income to different alternatives in terms of FX and fee income. And in terms of expenses, what we are doing is maintaining a tight control in the traditional expenses, increasing IT and transformational expenses but at a slower, lower pace than in the past and increasing significantly the expenses in the disruption initiatives. For example, from year 2021 to the year 2022, our expectation is that the expenses in the transformation initiative named Tenpo, Yape, Matrix, another initiative like that, it's going to be 2x the expenses of 2021, significant change because we are in a phase of scaling the business. We are not going to see a lot in terms of income, but we are going to see a lot in terms of use, number of clients, persistent relationship and starting to refine the product market fit in more than to produce income in the next phase. The next phase is years 2024, 2025. At this point, what we expect, especially at the end of the period is to have income growing faster than costs. That will imply to have, at the end of the day, an ROE -- this is our objective, it's not a guidance -- in the very high teens and cost-to-income ratio in the low 40s. It comes from income that is growing at a healthy pace, the benefits of scale and efficiency in business that has been transforming in a higher degree than now. And very important, income from the disruptive initiatives that at the end of the period, our expectation is that going to be cash flow neutral more or less, significantly more income, expenses at a higher level, the effect in P&L almost 0. But what we have been creating at this point is very important is internal business that is strongest because as transforming in cell has more capacities to compete with different players. And disruptive business at a scale that are not fully reflected in the P&L but imagine a Yape a Tenpo into the future at the scale, cash flow neutral probably at this point but a significant number of clients with the capacity to generate income and in the point to start generating positive cash flows down the road with different levels of maturity. Some of them are going to be cash flow positive. Others are going to be a little bit behind. And this is, in general terms, our expectations. And with this, I move to the last page. What we have at the end of the day, we are working in creating growth with different engines, expanding our addressable markets with new products, customer engagement, developing markets that we already know, but with new tools. In terms of profitability, the intention and what we are doing is to optimize our current business using this intelligence, this capacity that we have been developing using really these capacities to improve efficiency across the board and clearly monetizing the new ideas, not only the transformative business that are evident right now, but in the disruptive ones. And finally, and very important for us, a business that has fundamental risk that is lower than now because has been transformed, is more able to compete with different kinds of actors and have real options in terms of business that has the potential to create much more value down the road. Thank you very much.

Thank you, Cesar. It has been very important for us to be here. I hope this presentation helps you in understanding better both Credicorp strategy overall, but more specifically, the whole innovation process in which we are -- we embarked a few years ago. If you ask me about the 3 things that I would like you to take away today are the following. First, we did not start innovating yesterday, disrupting ourselves to expand and strengthen our leadership has been part of our DNA for the last, I don't know, 5 decades at least. Two, our final goal is to improve lives, increase financial inclusion and strengthened business while transforming to capture digital opportunities and not the other way around. We will do so by leveraging our existing competitive advantages, particularly our strong brand in Peru. Our scale and our extensive network of long-term client relationships while we accelerate development of our digital capabilities and our external innovation arm, Krealo, with the extra layer of support to our innovation strategy provided by the new governance model we shared with you today. And third, that as a result of this strategy, you're going to expect us to expand our digital presence and improve user experience to continue reducing unitary costs and to invest with discipline, optimizing the value of our innovation portfolio, all while we increased the cashless economy in Peru. Enhancing Credicorp's long-term value and sustainability will always remain at our top priorities. I would, once again, I'd like to thank you for having shared your time with us today. It was, again, very important for us to share this presentation for you to understand better Credicorp. We will now have a 10-minute break, and then Milagros will explain the procedure to start with Q&A. Thank you again. Thank you very much. [Break]

We are ready to start the Q&A session. We are ready. Who else is missing? Okay. Thank you. We will now begin the Q&A session. [Operator Instructions] Geoffrey?

Geoff Elliott, Autonomous Research. I'd like to get into Yape in a little bit more detail and specifically monetization of that. So you talked about potentially 30% to 40% of transaction volumes, TPV you can monetize over time. What does that monetization look like? What sort of take rate would you be able to charge? What transactions can and can't you charge take rate on? And then perhaps also the aspiration around the marketplace, what does the revenue generation look like on that? How do you monetize a marketplace?

So right now, we're not disclosing a lot of the details on how we're going to monetize. We do expect -- in terms of merchants, as we enter -- today, we're very focused on the small micro merchants. We will increase acceptance in the bigger merchant pool. And we will start thinking around MDRs probably very competitive MDRs in the market. And that should happen towards -- I mean, towards the end of this year, we should have scaled in the bigger segments of the merchant pool, and that would allow us in that line of business. We also expect to launch the marketplace where we will receive some -- more like a take rate fee in -- also towards Q3 of this year.

And maybe just to complement Raimundo's answer. It's targeted to a very long tail of merchants. So it's micro and sometimes it's different. You saw in the video a fisherman or -- so sorry about that. So sometimes it's quite difficult to know if it's a micro merchant or a person you saw in the video, I don't know a fisherman, selling fish and getting paid through Yape. Is that a micro business or is it a person? So -- but -- so at least as of today, we're not going to charge an MDR to that type of micro merchants. What we're doing is developing new features and value-added proposition for, let's say, the large SMEs. So -- which are segments in which the traditional acquirers don't operate. And there's where the MDR should come around. More importantly, I'm sorry to jump -- to use your question to go a step back. The whole play of Yape started as a part of the strategy of war on cash. And Francesca mentioned overall in the bank, our clients have jumped from 18% of noncash transactions to 40% of noncash traction. That has a huge impact on cost -- operating cost for us, but more importantly, on the amount and quality of data we can gather. And Yape started like that. so it's not only a stream of income directly through Yape but on the information we gather through API.

Tito Labarta from Goldman Sachs. Maybe to expand a little bit on the question for Yape. But I think overall, right, if you think of Peru, you have about 30 million people. Maybe you think -- how many are banked -- and then how many are addressable with all the digital initiatives from Yape and all the others? And I think you're also going into Colombia and Chile. So should we think of that as the addressable market? And I don't know if you have specific numbers or in terms of either like revenues or earnings that could come from the segments that are currently served versus what's the potential?

Okay. So the banking penetration per is around 45%. So that might be around 12 million -- a little bit more 14 million clients -- not clients, 14 million people that have a bank account. BCP has around 10 million. Yape, that's an overlap. Non-BCP clients might be 2 million now?

3 million.

3 million now. So basically, among BCP and Yape, we are close to reaching the total market in terms of number of people, but not in terms of usage and in terms of transactionability and financial inclusion. So that's how we see Yape. I'll ask Adolfo to complement me on the play on the regional side.

So in terms of Chile and Colombia, these are both equally countries of focus for Krealo's initiatives and for the external investing. We've started very consistent with the rest of the group. DVA is also long tail, so you can invest from $25, and our average ticket is just -- is a little bit above that, but it's definitely long tail. So we're looking at including into financial investing a very large portion of the regional population. And Chile Tenpo started with -- and they're known for being -- democracy of finance, I guess, is the translation of the slogan. So they've also started at the long tail. I think I would say that in all of our cases, while they begin at the long tail, you have a lot of early adopters in mid- and higher-end segments of the population. So I wouldn't want to give you a specific averaging number. While the long tail opportunity is very big in each of these countries, just given the modernization of finance, we're also seeing adoption by mid- and higher-end segments as well.

Can I ask maybe just one follow-up. Thinking about the competitive environment from both, I guess, incumbent banks and also neo banks in the region, how do you see that evolving in your position relative to competitors?

Maybe it's 2 answers again, and I'll go first with -- because it's 2 strategies. One strategy is in Peru, obviously, where we are trying to be preemptive so that we are -- and actually, Yape is a great example on that or [ Crediseguro ] was mentioned in one of the videos, electronic invoicing -- financing electronic invoicing. So in Peru, we're trying -- we're being defensive and preemptive. We do think that the approach we're having is the correct one in the sense that we are basically operating in any potential new market that may appear. Our competitors -- the other incumbents are somehow doing similar things. I don't like to talk about competitors, but Raimundo shared data on Yape competitors, I would argue that the network effect has been already done by Yape. And regarding fintechs and newcomers, there are a lot of fintechs operating in Peru, but very tiny so far. We haven't seen any relevant fintech or start-up operating in Peru yet. Having said that, we're always aware of what's going on in the market. Adolfo, you can complement that on?

Yes. And just to complement, we're seeing a lot of capital obviously investing in fintech, both from the incumbents and from VC funds or other sources. So in the case of us competing with capital from incumbents and building our venture portfolio, as Gianfranco mentioned, I think Credicorp is very serious about this, the new digital governance that we just presented reflects that. And we aim to be ahead of the curve in terms of investing from the incumbent side. From the value proposition and the competition from externally funded fintechs, that's why our operational model has those 2 sides. So we need to benefit Credicorp but we also need to have a very strong value proposition for ventures so that we can successfully invest in their cap tables and be strategic partners with true competitive advantages. So that's exactly the competition that you've alluded to in the question is kind of the reasoning behind how we presented the value proposition today.

And just one more point. I think in Peru solid position to start off with, has made us really reflect on how we can deepen and improve those relationships. And we do a lot of work around digitizing that, serving better, offering better products, better access and so forth. But we were leveraging that to grow into the adjacencies that were mentioned here today and also into new geographies. That, I think, makes us a little different to other incumbents. The way we view growth and using our capabilities to expand ourselves a little bit more. And also we're not as attractive for start-ups and fintechs in Peru because of the position and what we're doing as well, different to Colombia and different to Chile, where we need to be much more aggressive.

Jason Mollin from Scotiabank. My question is related to the operating environment, specifically the regulatory environment. We've seen lots of changes in other countries, whether it's a fintech law in Mexico or the open banking rules or payment rules in Brazil. Maybe you can talk a little bit about what you're seeing in Peru. Are they promoting regulation-light for start-ups does that view or impact the way you see the future and perhaps some comments in Colombia and Chile as well, if they've been supportive of start-ups?

Yes. As a matter of fact, there's a law proposal in order to yes, to flexibilize the environment for fintechs. So basically, the main goal there is as far as you don't have a fund -- external funding for deposits and so on, the capital requirements and yes, requirements in general are more flexible. That hasn't been approved yet, but is in discussion. That, I would say, is a major regulation going on in Peru. Since you've mentioned regulation, a couple of other issues that is not -- has nothing to do with the Digital Day, but just to mention them. One is there's also regulation in the works in order to -- for banks to raise their capital requirements. In our case, that shouldn't have an impact -- it might -- it's going to have an impact specifically more in smaller financial institutions. And the other regulation is Banco de la Nación going to the market. Even though they've decaffeinated the regulation, they might be, in the end, able to get into the market. That's something that we don't see as a threat at least in the short run because the focus is going to be in the microfinance business. Banco de la Nación has no IT, no risk models, no RMs, the whole market may have 30,000 RMs. So that might not be an issue. That's what's going on in regulation in Peru currently. Adolfo, I don't know if you have any?

Yes. Just very quickly, in Colombia, Chile and Peru both sandboxes and creating a more even playing field for fintechs and open banking. They're all moving through the layers of policy. I will say that even though not all of this is finished, the fintech scene in Colombia and Chile, for example, are booming right now. So I don't -- we don't see any limit in the appetite for funding or the number of players that are starting up in the space, while fintech regulation catches up and it's probably going to make the playing field more even over the next several years.

Maybe in Peru on the payment side and given the size of the number of people who are now participating in that, could there be tougher requirements on those kind of -- unlike Yape or the competitors that would require capital even if they're not taking deposits?

I don't think so. At least there's nothing on the table now. What might happen is a regulator trying to -- the operation among all the digital wallets to be interconnected. Yape started from day 1 as an open architecture. As a matter of fact, there are 8, 9 financial institutions that issue -- if you're a client of that financial institution, you can download the Yape app. If your -- Yape also has a prepaid virtual debit card, you can use Yape. So we -- since day 1, we are an open architecture app or yes, business. So we don't see, at least in the short run, again, a major change there.

Alonso. Alonso and then [ Nick ] at the back.

Alonso Garcia from Crédit Suisse. So my questions are regarding Mibanco. I mean last year, your strategy there reported very strong results. So my question is how much more can be found there in terms of the productivity of your relationship managers? Can this become eventually a 100% digital business model or not? And what's the stage of your competitors in terms of digitalization? And finally, do you think this digitalization can lead you to serve even lower income segments at Mibanco instead of individual loans, group loans and how much can be done there?

So today, I talk about the hybrid model because we really think that the personal relationship is going to be there for a long, long time. And the key of doing this hybrid model, as I told, is the risk assessment, like the centralized risk assessment. And then probably that's the main difference between the other competitors, the incumbents. Like all of us, we have apps, and we have a web landing page, but we are the only ones who are like succeed with this credit modeling. So that's the heart of the transformation. And that gives us better like competitive environment for us to grow and to keep reaching more and more of the market. And since -- we have this capability. We can use more alternative channels. And also we are creating those capabilities to reduce the time that the RMs spend like no ad value touch points with the clients. So all that free time, we're using it to grow further in the market. So we expect to reach more of the -- more clients in those segments. And also since RMs have a little bit more of time, we're using that part to gain more productivity. So last year, we have a 15% increase in the portfolio like size for each RM. And we think we can like keep growing in the same pace in the next few years.

Maybe to complement Antonio's answer, the microfinance model all over the world is a very high-touch model. So going to your specific question, do you see a fully digital business, for sure, not today. We are -- I was talking with someone in the breakout. We are moving slowly because what we don't want to do is break the model. The model is a very high-touch model. The model is a model in where the RM becomes sort of an adviser for the client. And the client, you have to bear in mind that it's a very low educated client. So there's a role that is played by our RM, which is key in the whole relationship. That's why for us, it's key what Antonio mentioned, we're taking out roles that do not add value or are more transactional. They all add value, but they're more transactional and focusing on the value-added roles and obviously, leveraging on technology. So in the short run at least, we don't see a fully digital model going forward in microfinance.

[ Mija ].

This is [ Mija Rivada ] from HSBC. My question is again on Yape. You mentioned earlier that you want to have a more independent operational structure for Yape. So what is the aim there? Would you like Yape to become more of a fully digital stand-alone bank? You also want to offer credit products through Yape, you mentioned. You have a debit card. Would you like to offer credit cards through your pay loans may be backed by BCP. So what is the plan with Yape?

So in terms of independence, we have set up an independent governance. So even though legally and within BCP I report to an independent board if you want with some independent members. So from a governance perspective, we are independent. In terms of what's what are the next steps? Is the operational independence in terms of technology because we operate on top of some of BCP accounts and because we operate through that, there's a lot of integration. We're building a lot of the new technology and separated from BCP and that is kind of, we call it, the Yape 3.0 and the new architecture, which will give us a lot of flexibility, especially for all these new things, right? The marketplace and distributing financial products, et cetera. In terms of the offering, we will start with micro loans in a month approximately. We -- we're about to launch a functionality, and we have total liberty in terms of what are we going to offer and distribute, and we will complement or even compete in some cases with Credicorp's office, depending on what the client wants, and what's the best way to reach the client and the most efficient way to do it. As we continue evolving, we'll start having a more clear figures, et cetera, of Yape's operation by itself.

Just to -- sorry, [ Mija ] just to complement. As always, there are trade-offs, right? And Yape and so the trade -- the initial trade off was -- still is how far or how close is Yape to BCP. The issue, as we were talking earlier in the morning, Yape has leveraged a lot on BCP's physical distribution channels originally because we had to educate Yape potential clients at the beginning. So that was a plus that was -- so it was positive for Yape to be closer to BCP, I don't know, 2 years ago, whereas today, they might become more independent. Regarding credit, the best scenario is actually to leverage both Yape and BCP with the data from Yape and BCP. So -- and then it becomes a channel issue. And if we see from a Credicorp standpoint, the more channels and opportunities for the potential clients, either Yape clients or BCP clients to get a loan or to access a loan, the better, obviously, for the client and also for us. So again, we might end up in an independent structure. But in the end, the whole vision, I mentioned at my closing words, is to enhance value for Credicorp.

So I believe the data will be shared between Yape and Credicorp, but the underwriting will be done by the bank by Credicorp, not by Yape?

Excuse could you repeat the question?

The credit underwriting would be done by BCP, not by Yape?

Yes, exactly because if we were -- if we wanted to do it through Yape with the current legislation, we will have to go for -- to ask for another license and so on. So why should we do that today when we have a bank that operates now? So those are the trade-offs we're managing right now.

And another question on Colombia and Peru. In terms of your strategy in growing in these other countries, is it more about having a stake or investing in local fintechs? Or would you also like to expand your network of Yape into these other countries and have your own operations rather than just investing in local fintechs? And I understand that in these countries, there are incumbent banks, both in Colombia and Chile, which are quite active, just like you are in Peru have their own very solid networks, their digital platforms. So how do you see -- if you plan to expand Yape? How do you see yourself positioning and competing with these solid incumbent players?

Yes. So 3 answers to that question. I'll take 2, and I'll pass the third one to do, Adolfo. Today, we are not thinking about expanding Yape to other countries. We think there's a huge agenda in Peru, and we're focused in Peru with Yape. The second answer is regarding Colombia, where we see there's an important opportunity is in microfinance. We already have I don't know, 10%, 11% of market share there. We do think that we have not only -- the current model we have in Colombia, but the model, the hybrid model Tonio talked about, we can export that model to Colombia. The Colombian microfinance market is much smaller than the Peruvian market but Colombia is larger than Peru and it's a very fragmented market. So we do see an opportunity, and we're looking for opportunities and actively looking for inorganic growth. That's Colombia and regarding digital in Colombia, go ahead.

Yes. So the CVC actually allows us the chance to play in these markets via nontraditional means. So it's no longer in Inter-Colombia, via a large -- necessarily be a large acquisition, but we can invest in one or several fintechs in order to get a foothold in the market. And we've also launched companies in markets like Colombia that have expanded to Peru and Chile. We've launched a new bank in Chile that is disrupting successfully, and we, of course, have plans to roll that out regionally as well. So what we're doing with the CVC is giving us more options in how to play each of the markets, and we can now play not just with traditional lines of business but with digital disruptors as well. So I wouldn't say that we have a cookie-cutter mold for each market. Each market has its own dynamics. The Colombian -- I don't know, neobank space is very crowded right now. So we will do individual go-to-market strategies and investing strategies for each case, both geographically, but also in terms of fintech subsectors because neobanks is very crowded, but there's also a lot of other spaces where we may want to play.

Okay. Any additional question within the room? Okay. I have a couple of questions from webcast. The first one is, can you comment about the importance of branches in the scenario of increasing the digitalization process? Is it possible to see a material reduction in the numbers of branches?

Yes. Yes, yes, yes. Yes to all. I'm going to take the second part. The reduction we've seen since 2018 to now, we've reduced our BCPs 70 branches. So we -- and this is part of the operational cost discipline. So we constantly reduce branches relating to the service we want to give and the types of transactions that we do. Some is reactive to customer trends in how they behave and some is proactive as to where -- how we want them to behave as well. For sure, we do see a role in branches in the future. I don't have specific number as to no, the brand -- the footprint size is going to be 200, 300 but the role of the branch in a country where there's still a lot of banking education. There's still a lot of sophisticated products like mortgages, different type of investments where you need to have a more physical type of relationship is relevant. And also, we have a branding -- a brand to maintain and to enrich, like we have BCP cafe, we're trying different types of space -- of physical spaces as to where we want to deepen relationships with affluent customer, mid-market and also SMEs.

Okay. This is a very long question. We have seen other traditional banks in the region, attending their current clients digitally, but also creating another subsidiary or a digital bank. These new digital Banks have all different products such as digital payments, marketplace, digital credit or debit card, digital insurance, digital wealth management, among others. However, they are starting to present a consolidated P&L and consolidated KPIs while identifying which are the key and profitable products and those related to the client engagement. As such, it seems in Credicorp's strategy in the future to create a consolidated digital business, providing specific KPIs or to keep the digital strategy within the traditional business? And can you please help us to identify which will be those digital profitable products and those that are related to create client engagement?

So I can start. It's a long question.

You can try with a short answer.

Yes, yes. So I would say that The idea is not necessarily to build a digital business. The idea is to improve our business. If that takes us to create a new Yape business or a neobank or of course, we will pursue it. But I think the idea around this is that we will pursue it gradually to have relationships with our customers. We're not a monoliner. We want deep relationships, the transactional relationship, the advice relationship, the investment and the credit. And I think here in this audience, we know where the money is, it's easier to know that the lending side is -- there's much more money there. So -- the short answer is I think we are going to move towards that direction. It doesn't mean that the objective is to build a specific P&L for digital, but no, this is, I think, what we're going to do.

Just a quick comment on that. From day 1, we said we're not becoming digital for the sake of being digital or digitalizing ourselves for the sake of being digital, but because we believe that being digital generates a much better customer experience and also improves efficiency. So that's the whole idea. If launching a digital bank is the right thing to do in order to pursue those goals, we'll do it. We won't do a digital bank because we want to be the best digital bank in Peru by itself. And maybe there was another question or sub question, regarding financials. From now on, we plan to be -- in the conference calls, I mean, to provide more specific information regarding the digital initiatives, not necessarily financials next quarter, but that's the goal going forward.

Okay. Here's one about expenses. You mentioned expenses should accelerate, particularly on transformation. What is this CapEx budget? And can you give me more color on what proportion of CapEx will be designated to modernizing the legacy systems of BCP and Mibanco versus new initiatives? Will this CapEx keep impacting G&A in coming years through depreciation? Or will it be fully expensed in 2022 and 2023?

Okay. I mentioned that what we have been doing is shifting the composition. If you remember, we are probably spending around 13% of total expenses in IT and probably another 3% more in transformational and disruptive initiatives so far. Down the road, what we expect is to grow this proportion, particularly in terms of the disruptive initiatives. Most of our, you can say, actual investment has been recorded investment has been recorded as expenses. For example, in the more transformational initiative, one example is Yape. You are going to find only very little assets in our books because we have been going through the P&L the acquisition cost, the transactional costs. So the risk of having a very bad surprise in terms of building assets that has very uncertain value down into the future, I will say that at this point and our expectation is very low.

Okay. We have a couple more about Yape. Yape and mix with Mibanco. Will Yape be able to have positive results or the focus will be to increase the stickiness of Credicorp with the client? If you believe the unit can be profitable, when do you believe it will achieve breakeven? And the other one is how is Mibanco leveraging Yape?

So I have to now that will be fine. The answer is Yes. So yes, Yape is in Mibanco's profitability. We expect it will take 2 or 3 years to get to breakeven and start bringing positive cash flow. Yes, I think that's the short answer for that question. And in terms of Mibanco, I can't remember who was talking about it, but Mibanco clients, can sign up to and sign up to Yape, a significant number have Yape and actually use it in their day-to-day operations. And we're operating together to reach -- I mean, we serve similar segments from both sides of the merchant and the individuals.

Look, we -- last year, we brought 155,000 of our clients into the Yape ecosystem. And that's a win-win situation like probably the fisherman in the video is an Mibanco client also. So we did that digital partnerships to like to have more digital interaction with our clients, which is like really necessary to go more to a further digital relationship to getting the loans. So payments is a really nice way to do it. And we, like, use Yape to introduce these cash-based clients into a digital payment ecosystem. So it's a really win-win situation for us.

And let me, I think, add one point to that Adolfo mentioned in his presentation, the way we complement each other at Credicorp, first is the cashless view, how we can digitize and include more people in terms of cashless and it's a distribution issue. I think that's where Mibanco and Yape complement each other. Payments is a type of distribution of payments, but maybe further on, Yape and disburse loans from Mibanco for the SME for the long-tail customers. And then there's a data issue. That's the value around that to improve those risk models so we can reach more customers, more predictable and go further into market. So I think that's where the magic happens.

Okay. Yape, for loans and other financial services like small-ticket insurance and investments, will Yape use BCP and other entities from the group? Or will it use other third-party entities?

So we will definitely start a commission next month with loans from BCP and booked by BCP. We're also talking with Pacifico for micro insurance. But as we evolve, I don't think it will be only credit card products because we will need to be able to offer what the client really needs. And if there is [ Yape ] that BCP doesn't have a loan for, maybe some other institution might and we can bring that to the table. So it's not definitive, but it will definitely be an important distribution channel for Credicorp products and for also the initiatives. We're talking with Tyba to see if we -- talking about connecting it so that increase its distribution capabilities in Peru, for example.

Just a quick comment on that. The slide Raimundo showed about the top-up market share Yape has today. in any market, a new channel that gets 5% of our market share of a mature market a 5% market share in 3 months demonstrates the power of the channel. So I do believe that we at Yape sit at a very privileged place in terms of distribution going forward. We have to be very careful in what products to distribute because I would argue that part of the success of Yape is its simplicity. So going forward, we have to obviously, add products and enhance our value proposition, but at the same time, keep that simplicity because of the type of clients we attend.

Okay. Do you have any strategy regarding banking as a service?

So this is something we've been looking at quite a bit in terms of fintech subsectors to invest. Right now, I would not say it is among the top 5 or 6 priorities of subsectors. As you saw, the list is quite long. We still have a lot to do in terms of building out our fintech portfolio before getting into the fast-growing segment of enabling other banks to also digitalize faster. So it's something we're looking at, but it's not in the priorities in the short term.

Yes. And maybe just to complement that, there's a -- I was going to say a team, but there's a group of people, both at Krealo and at the incumbents that are looking not only at Banking as a Service but also new trends and technologies that are coming so that we can be educated and aware of the development of those technologies.

Okay. Now here, a new one. How supportive is regulators in Peru -- SBS or Central Bank -- for fintechs? What will be Yape regulatory model? Can fintechs offer credit products? Are there asymmetries on capital requirements? Yes, these things have...

Basically, the question that Jason made -- the answer is, well, actually, I would say regulators, both Central Bank and Superintendency, are supportive in terms of developing the whole financial market. Again, Peru is -- still the level of financial inclusion is low, the level of cash usage is extremely high. So it's not only a matter of digitalization. It's a matter of how to enhance the value proposition from the overall market so that we can increase financial inclusion, reduce the usage of cash and so on. In that sense, both the Superintendency and the Central Bank are eager and helpful, again, not only fintechs, but everyone in the market so that this market can grow going forward.

Yes, Franco, just 1 thing to add. Regulatory issues aside, what's really important for the growth of the ecosystems is actually investment. So we believe we also have a role to play helping boost fintechs and adjacent start-ups in Peru, in Colombia, in Chile. And that role in growing the overall ecosystem is also going to be a byproduct of our investing and is also very important as a stakeholder in the overall growth of this ecosystem.

Okay. We don't have more questions.

Yes, Jason.

Thank you. Maybe a follow-up on the comment that during the volatility at 4 precedents in Peru in 3 years and the decision to continue to invest. Maybe you can talk a little bit about that process. It seems -- I mean it seems pretty obvious that you would probably do -- you have to do it or I don't want to say, die. But what went into that process with CreditCorp thinking about that? And particularly, do we think how does that impact the capital allocation and the capital ratios that you're looking for going?

Yes. So actually, the crisis were not only political but also the health crisis, right? So it was a perfect storm. The reasoning behind was we are over a 100-year company. We've navigated through storms in the past. That's part of the reasoning. And the other part of the reasoning was, obviously we didn't foresee the impact on the digitalization of the country as anywhere else in the world. But we believe that regardless of the crisis, the digitalization adoption by Peru -- by consumers will be there. So we didn't change any of our investment strategy because of the crisis. Neither the health crisis nor the political crisis, which I don't know if we should call it a crisis or the political new standard, right? Because we've been living in "crisis" for over, I don't know, 5, 6 years now. I would argue that if it's -- if you're in -- 5, 6 years living in that environment, maybe it's not a crisis anymore, but it's the new normal.

Okay, thank you.

Okay. Thank you so much for joining us together, both digitally or virtually and in person. It's very happy -- we are very happy to have shared with you all this information, this presentation and hope to see you soon. Thank you so much.

Thank you, everybody.

Thank you.