Hello everyone, and thank you for waiting. Welcome to PagBank PagSeguro's first quarter 2021 results conference call. This event is being recorded, and all participants will be in listen-only mode during the company's presentation. After PagBank PagSeguro's remarks, there will be a question-and-answer session. At that time, further instructions will be given. Should any participant need assistance during this call, please press star zero to reach the operator. This event is also being broadcast live via webcast and may be accessed through PagBank PagSeguro's website at investors.pagseguro.com, where the presentation is also available. Participants may view the slides in any order they wish. The replay will be available shortly after the event is concluded. Those following the presentation via webcast may post their questions on PagBank PagSeguro's website.
Before proceeding, let me mention that any forward statements included in the presentation or mentioned on this conference call are based on currently available information and PagBank PagSeguro's current assumptions, expectations, and projections about future events. While PagBank PagSeguro believes that their assumptions, expectations, and projections are reasonable in view of currently available information, you are cautioned not to place undue reliance on these forward-looking statements. Actual results may differ materially from those included in PagBank PagSeguro's presentation or discussed on this conference call for a variety of reasons, including those described in the Forward-Looking Statements and Risk Factors sections of PagBank PagSeguro's registration statement on Form 20-F and other filings with the Securities and Exchange Commission, which are available on PagBank PagSeguro's investor relations website. Finally, I would like to remind you that during this conference call, the company may discuss some non-GAAP measures.
For more details, the foregoing non-GAAP measures and the reconciliation of those non-GAAP financial measures to the most directly comparable GAAP measures are presented on the last page of this webcast presentation. Now, I will turn the conference over to Mr. Ricardo Dutra, CEO. Mr. Dutra, you may begin your presentation.
Good evening from São Paulo, everyone, and thanks for joining our first quarter results conference call. Tonight, I have here with me Artur Schunck, our Chief Financial Officer, and Eric Oliveira, our Head of Investor Relations. First of all, we hope you and your families are well and safe. Before we move on, just a quick update about the outbreak of COVID-19 in Brazil. It seems the worst is over. However, the economic recovery may take a while due to the speed of vaccination rollout in Brazil. Although we are enthusiastic about the availability of effective vaccines, the rate at which vaccinations are taking place in Brazil is still low when compared to other countries like the U.S. Consequently, merchants and consumers have changed their behaviors to keep working in this scenario with more digitalization, less cash, and the adoption of alternative payment methods.
Meanwhile, our dedicated employees have been doing an extraordinary job to keep serving our clients with excellence. Thank you very much, PagSeguro PagBank team. Despite the pandemic, the resilience of our business model and our focused execution allowed us to achieve great results and records in several KPIs in this quarter. I'm pleased to report that PagSeguro achieved a record consolidated TPV, growing 102% year-over-year and kept adding 300,000 merchants to more than 1 million PagBank users per quarter, while total revenues were above BRL 2 billion in the quarter. In fact, we are the company with the highest growth in terms of volumes, net adds, and have been increasing our acquiring market share in the past quarters, reaching approximately 9% in Q1 2021 versus 5.9% in Q1 2019.
Our last quarter's performance have reinforced our belief that both businesses, acquiring and banking, will deliver robust growth in years to come. Talking about banking, we continue to see unprecedented changes in the highly concentrated banking industry in Brazil. Although we have experimented the entry of new players in the last few years, PagBank being a precursor of this movement. In December 2020, more than 70% of the Brazilian credit portfolio was concentrated among the top five banks. We see that as a huge business opportunity and a reason to bring more competition to an economic segment that has been basically the same for decades. The opportunity to change people's lives fuels the stamina that runs in Pag's professional veins. We consider ourselves exceptionally well-positioned to continue to disrupt banking in Brazil because of three main reasons. First, our tech DNA.
Approximately 6,500 engineers in UOL Group, with the best-in-class professionals working for Pag. Second, our unique expertise and knowledge on the Brazilian internet. Since the early beginning back in 1996, which today the most visible aspect is the UOL audience, with a reach around 90% among Brazilian internet eyeballs. Right after Facebook, with 92%, and Google with 96% reach. Third, the fact that we are the first movers, creating a new market unserved by the competition before us. Finally, but not least, a strong culture and excellent execution. I would resume as Pag's way of doing it. We operate in an evolving industry whose answers to some questions are not 100% clear. For that reason, we permanently promote self-criticism. Having said that, we can affirm our investment thesis relies on the following six pillars. First, payments is the best entering door for digital banking.
Pag has the largest Brazilian merchant base that generates recurring revenues through a digital account that naturally provide cross-selling opportunities for additional banking products. Payments industry has consistently grown two digits in the last two decades, driven by merchants accepting new electronic payments. New payments methods such as NFC, P2P, among others, continue to replace cash transactions. For example, in the first quarter, NFC volumes increased almost eight times in comparison to the same period of last year. We consolidate our leadership in long-tail market, and we see limited competition as incumbents have given up serving these clients. We will prove our thesis that it's much easier to go up in the pyramid than to go down in it with our hub strategy. Our hubs are extremely successful, and we are gaining market share with profitable SMB clients very rapidly. Online is core.
Online payments go on as core for us. Our focus has delivered a growth of 140% in Q1 2021. Pag is enhancing omnichannel solutions for merchants and increasing cross-border transactions. In first quarter, cross-border volumes increased three times compared to the same period of last year. Third, cards and lending are core. Banking industry is highly concentrated, Brazilian unbanked population is still huge, and the spreads are very high. This is an opportunity for us 17 x larger than payments in terms of revenue pool. Pag has been working with cards and loans these last three years, mainly focused on the micro-merchants, creating a unique database and credit models to manage returns and risks. Clearly, a strong entry barrier for new players. Fourth, new financial products are core.
Pag's movement to go up in the pyramid to conquer market share in SMB's market can and will be replicated with other financial services. Fifth, technology, customer experience, and product development are core. Technology, innovative, and client-centered culture, combined with a lean structure promotes disruption, awareness, and engagement. In first quarter, Pag reached 48 million app downloads and processed BRL 81 billion. We believe that value relies on active and recurring clients, and we are happy to announce that we surpassed the mark of 10 million active clients in PagBank's second anniversary. Sixth, regulatory environment helps. Regulatory changes such as Pix, Marketplace of Receivables and Open Banking create a positive environment for new players like us. With these initiatives and achievements, we are truly committed to keep promoting the financial inclusion in Brazil, making investments that are creative and will bring higher returns in the future.
The pandemic is not over in Brazil. This year will be another challenging one, we feel prepared to face it and are ready to explore the economic rebound in the coming years. Artur and I will present some slides, and we'll have a Q&A session at the end. On Slide three, we highlight the achievements of the first quarter. We break down in three sections. Operating and financial results. PagSeguro, our acquiring business. PagBank, our banking business. Start with the operation and financial highlights. Consolidated TPV of BRL 81 billion, up 102% year-over-year. Total revenue and income of BRL 2.1 billion, up 30% year-over-year, with consolidated net rate of 2.41%. Adjusted EBITDA of BRL 573 million, up 12% year-over-year, despite PagBank and Hubs investments. Non-GAAP net income of BRL 337 million, down 11% year-over-year.
Excluding one-time events during the quarter, adjusted EBITDA of BRL 617 million, up 20% year-over-year, and non-GAAP net income of BRL 371 million, up 1% year-over-year. Moving to PagSeguro, acquiring TPV of BRL 50 billion in Q1, up 58% year-over-year, despite new lockdowns in the end of March 2021. Online TPV grew 140% year-over-year, while Hubs TPV grew 410% year-over-year, diversifying our exposure to new segments. Active merchants of 7.3 million, with net addition of 301,000 new merchants, or 1.8 million more merchants in comparison to the same period of 2020. Total acquiring revenues of BRL 1.9 billion, with adjusted EBITDA of BRL 725 million, margin of 38%. During this quarter, we launched PagPhone, the first worldwide one-stop-shop POS which combines acquiring, banking, and software. We also launched Moderninha ProFit, the smallest POS with integrated printer, and Auditec app, our reconciliation software. Moving to PagBank.
PagBank TPV of BRL 31 billion, up 261% year-over-year, boosted by wire transfers and new payments. PagBank app downloads of 48 million, with almost seven million downloads in the quarter. PagBank active clients of 9.1 million, up 144%, with net addition of 1.3 million in the quarter. PagBank consumer clients of 3.5 million, 5x larger than first quarter 2020. In first quarter 2021, consumers represented 38% of PagBank active clients. credit portfolio of BRL 773 million, deposits of BRL 5 billion, and PagBank CDBs surpassing BRL 1.4 billion in March 2021. During this quarter, we also announced the cashback offering for payroll portability and launched new third-party investment funds and personal accident insurance. Moving to Slide four. Two years ago, we launched PagBank, aiming to explore and capture the existing opportunity in Brazil.
At the time, we had a few products in our portfolio, providing the base digital account features only to our merchants. In Slide five, we can see all the achievements throughout the last two years, becoming a complete ecosystem now, serving both merchants and consumers, as we were able to combine acquiring, banking, partnerships, software, marketplace, insurance, investment, loans, and cards. Moving to Slide six, we show how powerful is our ecosystem and how it is boosting our growth trends. First, I'll talk about client acquisition and awareness. We reached 7.3 million active merchants, up 33% year-over-year, and 9.1 million PagBank clients in the first quarter of 2021. It represents a growth of 146% year-over-year. Moving down, we can see we reached 48 million downloads in PagBank as of March 2021. Talking about engagement, we observed the acceleration of volumes growth.
Consolidated TPV increased 102% year-over-year, while net consolidated TPV grew 215% when compared with Q1 2020. Our market share in the Brazilian payments industry reached 9%, more than three percentage points in comparison to the first quarter of 2019. Our products per user ratio increased from 2.5 to 2.7, which also indicates higher engagement of our clients. Last but not less important, in third column, Pag's monetization. Revenue and EBITDA growth shows we were able to monetize our businesses and to balance growth with profitability. Total revenues increased 30% year-over-year, and our adjusted EBITDA increased 12%. Moving to Slide seven, we'll start presenting our operating figures for the acquiring business.
Our TPV growth remains strong with a 58% increase year-over-year, boosted by TPV per merchant growth, which grew 18% when compared with first quarter 2020, and net merchant adds that reached 300,000 between January and March this year. Ended the quarter with 7.3 million active merchants. The strong growth, despite new lockdowns in Brazil, was driven mainly by a fast cash conversion into electronic payments and success in our new verticals and client segments, such as online and hubs. Volumes growth for April and May were very strong, respectively 108% and 91% increase year-over-year, despite the new lockdowns we had in Brazil in 2021. Moving to Slide eight. Total acquiring revenues were BRL 1.9 billion, up 29% year-over-year, accelerating the growth in comparison to 2020. Acquiring adjusted EBITDA up 28% year-over-year with EBITDA margin of 38%.
TPV mix improved in comparison to the fourth quarter, which drove up acquiring net take rate and payments profitability. Excluding PagBank revenues and transaction costs, acquiring take rate increased 17 basis points in comparison to the previous quarter, reaching 2.23%. Moving to S lide nine. Here we present some new acquiring initiatives we have been exploring. First, our online TPV, which has been growing much faster than previous year. In first quarter 2021, our online volumes grew 140% versus 13% in 2020. The acquisition of Moip, the digitalization process boosted by pandemic, and our several initiatives to incentivize online payments and omni-channel solutions were the main drivers. We are happy to announce card-not-present transactions during this quarter increased 116% year-over-year. Moving to our SMB hub strategy.
Our 2021 volume trends indicate we will be in the top of the range of our current guidance, which was 11% of acquiring TPV. Our forecast is to have 250-300 hubs up running in several cities and regions until the end of 2021, reaching 83% of Brazilian GDP coverage. Finally, software subscribers reached 621,000, 8.5% of Pag's active merchants. We plan to provide additional disclosure of our hubs strategy in the coming quarters. Now, moving to Slide 10, we'll share some PagBank figures. Starting with the strong growth of PagBank TPV, once again, a triple-digit growth totaling BRL 31 billion, accelerating the growth in comparison to 2020. On the top right, we have our PagBank active client figures. Which was 9.1 million, being 38% composed by consumers. Net adds were 1.3 million, with consumers representing 58% of first quarter net additions.
These figures show our strength to serve both merchants and consumers with our two-sided ecosystem. Bottom left, we share our product per user ratio. In Q1 2021, our products per user reached 2.7, 0.2 higher than the same period of 2020, reinforcing clients' stickiness to our ecosystem. PagBank revenues reached BRL 149 million, up 48% year-over-year and accelerating in April 2021 to above 80% when compared to April 2020, although April 2020 was the worst pandemic month in Brazil, impacted by lockdowns, which drove down withdrawals and card spending. Additionally, for those clients with higher engagement, such as merchants active in PagBank and consumers with payroll portability, we offer some free ATM withdrawals per month, exchanging short-term revenues for higher engagement and future monetization. In Q1 2021, PagBank adjusted EBITDA was a loss of BRL 78 million, driven by headcount increase, marketing expenses, and transaction costs.
In first quarter, we had a one-time event related to digital account losses, not related to loan provisions or credit risk management, amounting BRL 73 million. The massive data leak in Brazil, which happened in January 2021, did not affect any of our systems, data, or infrastructure. It provided information to foster activities in online transactions and bill payments. As we identified these transactions, we immediately blocked them. Again, this is a one-time event. Moving to Slide 11, we present some additional data about PagBank and PagBank Invest. The number of active cards increased at three times in comparison to the first quarter of 2019. In May, we launched a new home marketing campaign in partnership with Visa to foster card payments. In this campaign, PagBank clients will receive cash prize, and one of them will get a house.
Day-to-day banking, the number of PagBank app logins was 549 million in the first quarter of the year, while bill payments transactions have been gaining a lot of traction. This is a very good sign since usually, clients elect their main banks to centralize bill payments. Finally, PagBank Invest assets under custody reached BRL 4.2 billion, up 127% year-over-year, with PagBank CDBs almost doubling the size quarter-over-quarter. Worth to say, all this AUC is based in PagBank CDBs and a few investment funds. We plan to have equities and Treasury bonds in the following weeks, which we expect to help increase assets under our custody.
Recently, we allowed our investments platforms to receive orders 20 hours a day, seven days a week. We also launched new third-party investment funds managed by well-known investment firms in Brazil, such as Western Asset, Alaska, Hashdex, BNP Paribas, Journey, and AZ Quest. Now, I'd like to turn the conference over to Artur, our CFO, who will talk about our credit portfolio and our financial results for the quarter. Artur, please go ahead.
Thanks, Ricardo, and good evening, everyone. In Slide 12, we show our credit portfolio where the performance is improving every day based on credit models result. We ended the month of March with a total credit portfolio of BRL 773 million, being 53% of working capital loans, 43% credit cards, and 3% of other credit products. As we have been tracking very close the NPLs by cohorts for working capital loans and for credit cards, trends are getting better since August 2020, showing very healthy numbers. Our confidence has been increasing and encouraging us to reach the highest level of credit disbursements in May. We expect to increase credit originations going forward, mainly in the second half of this year. Our cash position remains very strong, with a positive balance of BRL 8.1 billion, reinforced by the issuance of PagBank CDBs to fund the credit disbursements.
Loans-to-deposit ratio was 53%, guaranteeing stamina to grow our credit portfolio in a healthy and sustainable way. Moving to Slide 13, we present our quarterly financial results. In the top left of our consolidated net take rate reached 2.41%, representing an increase of 11 basis points in comparison to Q4 2020 and 6 basis points versus Q3 2020, driven by better TPV mix with more credit and lower debit transactions, and a longer duration for credit cards receivables in installments. In the top right graphic, we share our non-GAAP total costs and expenses, which totaled BRL 1.6 billion in the first quarter of 2021, up 51% year-over-year. Cost of sales and services represented 70% of total costs and expenses, remained at the same level of Q1 2020 and increased 49% year-over-year.
The main drivers were higher interchange and card scheme fees following the TPV growth, higher depreciation and amortization related to our solid active merchants additions during the past quarters, and expenses to new products and services developed to PagBank. Selling expenses represented 23% of total costs and expenses and increased 94% year-over-year due to headcount expansion for our hubs and the one-time digital account losses of BRL 73 million previously explained by Dutra. If we exclude the digital account losses, this line increased 56% versus the same period of last year. In the bottom left chart, our adjusted EBITDA was BRL 573 million, excluding the negative effect of BRL 73 million related to one-time digital account losses not related to loan provisions or credit risk management, and the positive effect of BRL 29 million related to tax provision reversal.
The recurrent adjusted EBITDA was BRL 618 million with a margin of 30%. Finally, in the bottom right, we share our capital allocation strategy. During the first quarter of the year, we invested almost BRL 393 million, being 62% in POS acquisitions and 38% in other initiatives, mainly related to product and software developments. As a percentage of revenues, CapEx decreased 4 percentage points, reaching 19% versus 23% in the first quarter of 2020. Thank you all to joining us tonight. Now I pass the word back to Dutra to conclude the presentation.
Thank you, Artur. Moving to Slide 14, we present PagPhone. During the last quarters, we were working very hard to launch the first device in the world, which combines acquiring, banking, and smartphone. Everything in one single device, creating a real one-stop shop solution for our merchants, reinforcing our leadership in the long-tail market and continue to be a company driven by innovation. Finally, in Slide 15, our last slide, we present Moderninha ProFit. This is the smallest POS with integrated printer in the market. Initiatives like this help us to offer a better customer experience and to allocate capital more efficiently, consequently improving our LTV/CAC Ratios. With that, we end our presentation, and we can start the Q&A session. Thank you. Operator, please.
Thank you. We'll now begin the question and answer session. Our first question comes from Jorge Kuri with Morgan Stanley. Please, Mr. Kuri, go ahead.
Hi. Good evening, everyone, and congrats on the numbers. I have two questions, please. The first one is on your TPV guidance of 40%. I think that chart on Page seven is quite telling. I think you're running at significantly above that, and hopefully we've passed the worst of this year. Is it possible that the number is just significantly above that? It wouldn't be surprising given the current trends that you end up at 55%-60% growth. What stops you from updating that guidance? Where do things could potentially go wrong and we do end up in 40%, which would be a big deceleration from the first five months of this year? My second question is on NPLs, and I'm not sure if this is related to the digital losses. I'm not sure that I understood properly what that is.
Anyway, my question is on NPLs, going to your Slide number 12, where you have the pre-pandemic cohorts and the post-August 2020 cohorts. Can you maybe explain how loan losses are trending over the last few months, particularly given the difficulties of the first quarter? Just if you can explain what those digital losses are and if indeed those are part of the NPLs. Thank you.
Hi, Jorge Kuri. Good to hear you. Thank you for the question. Thank you for the compliments as well. This is Ricardo. I will start with TPV. Then begin to answer your question number two, and Artur can complement. Talking about TPV, you're right, we are running above the 40% guidance. We are confident with this guidance. The reason that we do not update is because we are still in the middle of the pandemic in Brazil. We have some uncertainty looking forward. We have tougher comps in the second half 2020 because the government had BRL 300 billion in Corona vouchers last year in the second half. We have tougher comps. We need to wait and see how it's going to be the economic recovery in Brazil. That's why we don't update at this point.
As time passes by, we will be more than happy to update that. That's why we are confident with this 40% at this time. Talking about the digital losses, just to be clear here, there is no relation with credit, no relation with loans. That happened because we were, I would say, more aggressive than what we should in terms of authorizing some bill payments transactions. What we had is people coming here paying bills, some of them with credit cards, and then we had chargebacks afterwards. We had this, we are saying here Q1, but actually it was in February and March. We already adjusted that. We didn't have any impact in April and May. It is really a one-off. It is really a thing that happened in February and March, and that's it. There is nothing that's going to happen in Q2 regarding that.
Again, there is no relationship with NPLs or things like that. Just to be clear here, I want to reinforce that we didn't have any problems with our infrastructure, with our data or data leak. What we had was a massive data leak in Brazil in January 2021, it was in the news, and probably we're aggressive in authorizing some bill payments transactions to credit cards. That's it. We already adjusted that, and it's not happening in Q2. Talking about the NPLs in Slide 12, I'll ask Artur to help us here. Again, Jorge, thank you very much for your question.
Hey, Jorge, it's Artur speaking, and thank you so much for your question. It's a pleasure talking to you.
I think the idea of these graphs is show you that when we start to offer credits again in August 2020, our NPLs are much better than we have before because we learned a lot during the pandemic period. You know that in March 2020, we stopped our originations, and we learned a lot, adjusted our models, hired new people, more experienced to that. Now we are having better results than we had before. The idea is just give you more color about it because we don't give the number. It's important to you to understand that we have a better performance right now than before. That's it. We are very happy with the numbers and encouraging us to accelerate the originations going forward.
All right. Thanks, Ricardo and Artur, for that. Thanks again.
Thank you.
Our next question comes from Mariana Taddeo with UBS. Please, Ms. Taddeo, go ahead.
Hi. Hello, everyone. Thanks for the opportunity of asking a question. It's regarding the SME segment. You mentioned that should represent 7%-11% of your total TPV this year. Could you share how much it represents today? If you could give us some color, where are the merchants in this segment coming from? From the incumbents, from Stone or any other player? I don't know if you could share that. In the presentation, you mentioned the penetration of the software within the SME clients. I want to understand if you are offering the banking credit products to them and how is this penetration. Thank you.
Hi, Mariana. This is Ricardo. Thank you for the question. We are not disclosing the exact number of hubs TPV in the total TPV at this point, Mariana. As we said at the presentation, we plan to give more color as time passes by. Just we don't want to give this information at this point for strategic and competitive reasons. Regarding the players that we are getting in this segment, it varies, but usually it follows the market share in SMEs. The majority of them we are getting from incumbents, and then we have some others coming from new players. It follows a little bit the market share of this segment. We are the, let's say, the newcomer here. We are the company that is, let's say, competing with the other ones, being the aggressive here.
That's why we are getting all these new merchants, and TPV grew 410% year-over-year. Regarding the software, the 8.5%, we actually use the information we had from software to put in our models, in our credit models, because we have more information from the ones who use software versus the other that don't use it. I don't have here in the top of my mind how is the penetration of credit for these clients, to be sincere. It's one variable of the models, not the main one, but it help us to improve our models. I don't know if I answered your question.
Yeah. On this second part of the question in terms of banking and credit, just want to understand if you are offering, if they have the credit product or, I don't know, credit cards or something like this?
Oh, yes. We are offering credit for SMBs as well. We are growing our credit portfolio BRL 160 million in this quarter. Almost 100% of this 160, we focus on the merchants. Very small part of that is focused on consumers for small pilots here and there, but the majority of that is for the merchants. Yes, we are offering credit for SMBs as well.
Thank you.
Our next question comes from Bryan Keane with Deutsche Bank. Please, Mr. Keane, go ahead.
Hi, guys. Congratulations on the results, especially given the tough economic environment. Two questions. I guess, be interested in some more color on the increase in the TPV per merchant. I think it was up 18% year-over-year versus 3% looking at last year's increase. Just trying to understand how much of that is stimulus versus what's been the driving factor there. My second question on the margins, obviously you guys are making a lot of investments and the margins were impacted by those investments. Just was hoping you guys could give us some color on what the net income margin might look like going forward for the rest of the year, and how much to expect for the investments in the hubs and PagBank, et cetera. Thanks.
Hi, Bryan. Thank you for the question and thank you for the compliment. Talking about the average TPV per merchant, there are some drivers here. If we look in Brazil, we are seeing the penetration of cards in PCE is increasing. It used to be, I guess, 40%, and now it's close to 44%. We see more adoption of electronic payments. We are also increasing our participation of online and hubs in our total TPV. As we go up a little bit in the pyramid, the average TPV per merchant will grow as well. I guess those are the two main drivers here, people using more cards, less cash, and also we are having more TPV coming from online and for hubs.
Thanks. Bryan it's Artur speaking. Thank you so much for your question. It's a pleasure talking to you again.
Regarding to margins, as you said, we invested a lot during the last months and also in this quarter we invested a lot in PagBank to hire more headcount and product development, to develop products like PagBank Invest, insurance, credit, and also we are investing in hubs with salesforce, facilities, rentals, and also marketing to promoting our new products and services. Right now, in terms of nominal, we are slightly better in the bottom line in 2021, even though our focus is to reach the best balance between growth and profitability. Looking for a bigger company in the future, gain scale to leverage expenses. We are much more focused right now on the growth of the company to leverage expenses in the future and improve margin as well in 2022, 2023, in the more mid, long term.
Got it. Any guidance on where we should set our models in terms of the net income margin going forward for this year, just given those investments you talked about?
Yeah, Bryan Keane, we gave the guidance for TPV for CapEx. What we can say here that in absolute terms, our net income this year will be better than last year. We don't have the exact number here, as Artur said, we are looking for, let's say, more growth this year than profitability. In absolute terms, we're going to see a better net income this year versus 2020, even with this challenge that we are seeing in Q1 with lockdowns and so on, and more debit transactions and so on. That's, let's say, a better guidance I can give you at this point.
Got it. Great. Thanks so much.
Thank you.
Our next question comes from Craig Maurer. He's an Autonomous Research. Please, Mr. Maurer, go ahead.
Yeah. Hi. Thanks again for taking the time. Appreciate it. Was wondering, just some housekeeping items. You provided TPV growth for the acquiring channel through April and May. Could you provide what the total consolidated TPV growth was for April and May? Second, I wanted to return to the non-credit digital account losses. Just some additional clarification. It sounds like you're authorizing bill pay on credit cards, but that something went awry and you wound up with a lot of chargebacks. Were these fraudulent bill payments? I'm trying to understand what went wrong in that-- I know it's one time, but what went wrong in that authorization process that might be a learning experience for you? Lastly, in the SMB hub business, are you seeing a strong degree of software uptake? To what degree are you seeing perhaps an omnichannel opportunity in the SMB business?
Can you bring Moip to address some of that? Thanks.
Hi, Craig. This is Ricardo. Thank you for the question. We must discuss here internally how it's going to be if you can give the TPV for PagBank. We didn't give in this call. We just need to see what is the best way to give this disclosure. Of course, it's growing a lot. We just closed in May. We can discuss, we can make it public before next call. I don't have the answer to you at this point. Talking about the digital account losses that you asked, we were aggressive in authorizing some transactions. The models for bill payments, let's say, authorizing more transactions than it should. It's not credit related, it's not NPLs related to loans or things like that. It's just that people came here to pay bills through credit cards.
That's the majority of the chargebacks, and we authorized some of the transactions that after we reviewed, we should not have authorized. We were aggressive in doing that. That's what happened. There's no data leak. There's nothing like that. Just people came here, decided to pay a bill, and then we had this chargeback. That's as simple as that. Regarding SMB and hubs, yeah, they are using our softwares, although we know that our software at some point, they are very complete, but to some type of merchants, they require something more sophisticated. At the end of the day, what we are looking here, we are bringing the merchants that are four to five times larger than long tail. They are still small. They are not very sophisticated.
Part of them could be omnichannel, we know that part of them will not be omnichannel because of their business. Just let's say the guy from the restaurant, sometimes he's going to find a new platform to make delivery, PagBank will not provide that for him, although we have a small platform. Just to give an example here. The guy that has auto parts probably will not, let's say, fix cars and reach these customers through online. We see some opportunity for omnichannels. For those who we think that is feasible, we can offer solutions, link of payments, and things like that. I'll say the majority of them still today, they are not omnichannel. They are more physical stores, because we are going, let's say, in the bottom of the pyramid of SMBs.
They're not well-sophisticated for softwares, and part of them are not ready for omnichannel, and that's fine. At the end of the day, what I want is to bring them for acquiring and make them to use PagBank, get the data, at some point increase the relationship, strengthen the relationship with them. We could offer credit and credit cards and so on. Our idea is much more to have the financial services embedded with our solution than other solutions at this point.
Thanks. Are you seeing any change in behavior around Pix, any P2M transactions, or is it still mainly a P2P channel?
Well, Craig, we don't see Pix hurting our acquiring business or people using Pix to make payments. What we see is Pix replacing wire transfers. Let's say if you had a bill that you used to pay through wire transfer, people did not use cards, now they are using Pix because Pix is free and is instantaneous and so on. We don't see Pix, let's say, cannibalizing our acquiring business. As you could see in our growth, 58% year-over-year. That's the thesis that we have, the hypothesis that we had from the beginning, since when we started talking about Pix in the beginning of last year. Pix is much more to replace wire transfers, at some point to replace cash, and help digitalization of some people in Brazil.
We can take advantage by offering PagBank, and you could see that we are growing more than 1 million PagBank clients per quarter.
Thank you.
Thank you.
Our next question comes from Mario Pierry with Bank of America. Please, Mr. Pierry, go ahead.
Good afternoon, everybody. Congratulations on the results. Let me ask you two questions as well. Primarily related to revenue generation. How should we think about the direction of the take rate on the acquiring business, taking consideration the Hubs expansion, and also taking consideration that the economy is opening up, so we should see a better mix of credit versus debit? Also when we think about the take rate on PagBank, I think it's fair to say that PagBank is growing much faster than we anticipated. I was wondering if you think that you can achieve your target or your soft target of 30% of revenues coming from PagBank three years from now, if maybe we could anticipate that. Thank you.
Hi, Mario. This is Ricardo. Thank you for the question. Regarding acquiring take rates, as you could see, we grew 17 basis points in Q1 versus Q4, even with more TPV coming from SMBs, which has a lower net take rate because they are a little bit larger merchants. Looking forward, what we expect from the acquiring take rates to be stable. There's going to be some variation here and there, but to be stable because we're going to have more clients coming from Hubb's. We put some pressure in the net take rate coming down. On the other hand, we have the tailwind, that is the mix of payments, more credit. Looking forward here this year, we expect to be stable or improve a little bit. Let's see how it's going to be. In Brazil, we have a lot of ups and downs and lockdowns suddenly.
Unfortunately, the rate of vaccination is not going pretty fast as we see in other countries. Some people talking about third wave, some cities making lockdowns, some others opening. It's still a lot of uncertainty. To give a, let's say, soft guidance here, let's consider it stable even with the pressure coming from PagBank, which in our opinion is a very good performance. The other question about the 30% PagBank. It's hard to say if we're going to be able to make it earlier than that, Mario. We prefer to keep it in 2024. Let's follow the following quarters, and then we can update. What you saw in April is a good level of revenues in April, much better than Q1. Let's wait a little bit, and then we can update it. It's feasible to have before that.
I just don't want to affirm that at this point.
Yeah. Hi, Mario. This is Eric. I'd just like to reinforce here that we will reach 30% in one of the quarters in 2024. This is not an easy task because we have been seeing payments growth very fast and solidly. Even our new verticals, such as hubs and the online. It's a hard task here, but we continue to be committed to this 30% in one of the quarters in 2024. Thank you.
Okay. Let me follow up then here on PagBank. Even if we add back these losses that you booked of BRL 73 million, we're calculating revenues per clients of about BRL 24. Is that about right? When we look in the fourth quarter, we have around BRL 27, and one year ago at around BRL 27. Any reason why revenues per client are coming down with PagBank?
Mario, we should make the math here just to be if we have the same numbers that you have. Usually the dynamics for PagBank monetization are the following. We bring the client, they stay here for a while, they start using, engage with the solution. Then we see monetization afterwards. There's some lag between bringing the client and having the revenue. That's why at some point we see the number of clients coming to 9.1. The revenue is not coming at the same pace because it takes a while. That's even more true if we think about consumers, because the consumers don't have the automatic cash out that you have from the acquiring clients.
Even if the client loves our app and it's easy to use, very good UX and so on, if he doesn't have any money there, he cannot do anything. That's why we see some lag between bringing the clients and then the revenue. That's the main explanation of that. We also said in the presentation for some of the clients, we decide to give free ATM withdrawals, which should bring revenues a little bit down. It's not material, but of course, it doesn't help. Those are, let's say, the main reasons here, but the main reason, the main driver is the lag between bringing the clients and having the revenue from these clients.
Perfect. Very clear. Just a final follow-up then on PagBank here. I think in the past, you had talked about maybe breaking even at PagBank in the second half of next year. Is that still your view?
Yeah, that's our view.
Thank you.
Yes.
Our next question comes from Jeff Cantwell with Guggenheim. Please, Mr. Cantwell, go ahead.
Hi. Thanks for taking my question. Can you hear me?
Yes.
Great. I wanted to ask you one quick question on PagBank. You've grown your PagBank clients to 9.1 million over the course of two years, which is impressive. Underneath that, the active card base has increased by over three times, while you're also laying in new products and clearly they're seeing an uptake and more and more adoption. I think that all suggests that your average revenue per user should continue to increase, perhaps more materially as things continue to normalize. Do you agree with that idea? The reason I ask is because we see other banks, some in Brazil, with fairly high average revenue per user numbers. I think it's still early days for you guys.
I'm just curious if you agree with that view and if you can give us some updated thoughts on what your ARPU in PagBank might go to over time. Any color or thoughts there would be appreciated. Thanks very much.
Hi, Jeff. Thank you for the question. I was trying to, let's say, explain that as well for Mario. Yes, in the medium to long term, we expect the revenues from PagBank users to go up. That's one of the drivers for us to reach the 30% of the revenues of the company coming from PagBank by 2024. What you have here is that there is a, let's say, a longer time between opening the account and starting generating revenues. This is even more true when you have the consumers, because the consumers don't have the cash in. They need to open the account and then wait to receive the card, and then they're going to receive some money here, some wire transfer from other banks or Pix or the payroll or so on. Yes, you're right. We are bringing these clients. That's the first.
Let's say we have this framework to bring the clients, engage, and then monetize. I would say we are between the first and second step today. We are still having lots of accounts, millions of accounts every quarter, so bringing new clients. The engagement is increasing. Monetization is happening, but it doesn't happen at the same pace. There's this lag between bringing the client and then start monetizing. Looking in the medium term, that's the idea. I said before, we are running some pilots with consumers, making some additional products to them, testing with them. In a few weeks, we're going to have equities here so people could buy stocks here. We're going to have treasury bonds. We just launched two options of insurance. Personal insurance and home insurance. The idea is to make this cross-sell and increase the average revenue per user in PagBank. That's the idea.
That's the dynamics that we expect to happen.
Great. Appreciate that. Then a quick follow-up on PagPhone. I was hoping you could give us some thoughts on why now, and just how that piece fits into the strategy, and maybe just consolidate our thinking on the acquiring side, while you're building a one-stop shop for micro merchants, and how that might be a driver for you guys maybe in terms of net adds, volumes, et cetera.
Yeah. You're right. That's exactly for the micro merchants or the long tail. We don't think that's a device for someone who has a lot of transactions every day because POS is better for this type of volumes when you have a lot of transactions than when you have a few transactions per day. It's focused on the micro merchants. Everyone has a smartphone. Some of the guys use it to have the smartphone and pair through Bluetooth with our mPOS, with Minizinha. The idea here is to have everything in one device. They already receive the device with a PagBank account because they create this account when they buy the device. They create, let's say, the login and password. They have the app there. They can order a card and so on.
The idea is to have an additional option for the long tail, for the micro merchant. The average ticket is much higher than other POS, so although we are selling better than what we expected, we don't have the same volumes that we have for smaller POS and Minizinha Chip and things like that because of the price. It's doing well. The idea, as you said, is to have for the long tail, one-stop shop, and people can use it as a POS, acquiring a digital account, and as a smartphone. It is a very good smartphone, by the way, with cameras and so on. That's the idea.
Okay, great. Appreciate all the color. Thanks again, and congrats on the results.
Thank you, Jeff.
Our next question comes from Rayna Kumar with Evercore. Please, Ms. Kumar, go ahead.
Good evening. Thanks for taking my question. Really good to see the strong TPV coming out of PagBank and, of course, your acquiring. I'm just curious to understand if COVID-19 had any material impact on the prepaid card interchange revenue that you make with PagBank.
Hi, Rayna. Thank you for the question. The reason that our revenues in PagBank were not even higher than what they were is because we did have some impact of people not using prepaid cards because the cash-in and even the, let's say, the corona voucher from the government didn't happen in Q1, and also people using less cash. We also make some revenues from people taking the money through ATMs. We charge some tariffs there. There was a decrease in that, people at home not using cash. That's part of the explanation why the revenues from PagBank in Q1 weren't even higher. It's not a big issue. It's good volumes. We are still the number one in prepaid cards in the country, by far, and we are sure that once the economy rebounds, we're going to have to rebound as well.
Part of our investments, we didn't mention before, but part of the investments that we've been doing since 2020 and 2021 is because we know the COVID, although is a little bit longer in Brazil when compared to other countries, COVID is something temporary, and the economy will rebound. When the economy rebounds, you just want to be ready to take advantage. That's what we did in 2020. That's what we did in 2021. That's why we were the company with the highest growth in terms of TPV in our market, taking share from others, creating this new market, and bringing these new customers. Going back to your question, yes, there was a little bit impact in the prepaid card because of a little, let's say, lower spending in the prepaid cards in Q1, but it's something temporary. It's not a big issue.
Got it. Very helpful. On your Hub strategy, you gave us some clues on your potential volume contribution from Hubs in 2021. Could you help us better understand what the potential revenue and earnings contribution could be this year?
Rayna, we can give you more color about Hub strategy when we think it is appropriate. Of course, we are having this operation here, trying to beat other companies that are already there on the street. We are here the challengers. We just don't want to give too much information about our performance at this point. We gave the guidance about TPV. Once we think it's feasible to give more color on that, we can give you. It's not because I don't want it's just because of, let's say, competitive reasons, we just don't want to give too much information about it, and let's say, let's have this operation up and running, and then when it's more mature, we can give more color, even with more confidence about the numbers and our performance. So far we're doing very well. We are beating our estimates.
That's why I said that we expect to be in the top of the range of TPV, which was 11%. That's the guidance. We are doing well.
Understood. Thank you.
Thank you.
Our next question comes from Tito Labarta with Goldman Sachs. Please, Mr. Labarta, go ahead.
Hi. Good evening. Thanks for the call and taking my question also. Maybe just one quick follow-up on PagBank in terms of the client additions. PagBank remains pretty healthy. Do you think, and you kind of alluded to it, but about a million clients per quarter is sustainable? For how long that's sustainable? Maybe another way to get to the 30% of revenues, how many clients do you think you would need to have? At the pace you're going, I think it would be over 20 million clients in a few years. Is that a reasonable assumption? Maybe in terms of the products that they use, is sort of the main cash just like the prepaid cards or which product do you think is generating the most interest amongst the PagBank clients? Thank you.
Hi, Tito. Thank you for the question. Yes, we do think it's feasible to have 1 million new clients per quarter. Hard to say when it's going to be over. I remember, just make a quick parenthesis here, but we've got this question about acquiring merchants in the past three years, how it could be sustainable, if it could be sustainable for us to add 1 million merchants per year or 250,000 per quarter. We are doing this since 2018, since we became public. Every year, at some point, we think it's going to be a challenging one, but we always beat our estimates because we're still playing a huge market. In terms of merchants, we expect to have 30 million people in Brazil that work by themselves, or they may need a POS.
There is still, according to our estimates here, one-third penetration at this point. In terms of PagBank, some estimates say that we have 25%-30% of people without a bank account, even after COVID with all digitalization, maybe it's a little bit lower than that, but it's still huge. That's why we are planning more than 1 million per quarter. We also said in the presentation here, we closed March with 9.1, and in May, we already surpassed the 10 million. We already added 900,000 in previous Q2, and we still have part of May and full June. We think it's feasible to have this 1 million for a while. To be sincere, I don't have in the top of my mind the number of clients in PagBank to give a number, but you can imagine we already have more than 10 million.
I don't think it's impossible to have this 20 million that you mentioned. About why people come to us, I guess there are many reasons here. First, because our brand, the strength of our brand, people know how we work. People know it's a, let's say, a company that you can have confidence, you can put your money here. We have distribution through UOL that covers more than 90% of eyeballs in Brazil, right after Google and Facebook. We invest in marketing. We've been investing in the account. We do a lot of research, how people use it, where they are having some difficulties, try to make it better, easy to use. It's very simple. Just download the app and in up to three minutes you open an account. You send your picture and it's done. It's a full free account.
People just come to us because they know it's a free account. They can have interest in their balances. Although we make it free for the consumers or for the user, we are receiving money from the companies. We are, let's say, receiving the bills and so on. Those are the main reasons. People come to us because it's free, strength of the brand, efficient distribution that we have, and investing as well.
Great. Thank you very much.
Thank you.
Our next question comes from Otavio Tanganelli with Bradesco BBI. Please, Mr. Tanganelli, go ahead.
Hi. Thanks for taking my question. I wanted to ask on PagBank as well, the credit portfolio increased a little over BRL 200 million quarter-on-quarter. I wanted to understand if NPLs are behaving well and the economy is expected to improve in the coming quarters, why not accelerate loan originations or when should we see, how to say, more aggressiveness in terms of the loan book here? Thank you.
Otavio, Schunck speaking. Thanks so much for your question. It's a pleasure to talk to you. We are showing that we have better NPLs for credit, but we are a conservative company. We have a lot of cautions about the uncertainty of the market. As Dutra said, some people are saying that we could have a third wave here or other issues related to COVID. We don't know exactly when the economy will rebound, but we have all the conditions to accelerate. We are starting to do that in Q2, and so you will see in the coming quarters better volumes. We will increase our portfolio in the right way. We are understanding the models, understanding the NPLs, understanding the performance, and growing the portfolio. We understand that this is the best way to do that.
We have the conditions to accelerate more, but we are cautious related to the economy, related to the moment that we are living in the country. You will see in the future our portfolio growing.
Otavio, this is Ricardo. Thank you for the question, good talking to you as well. We were ready to accelerate last year, but of course, when you have the model, when you have COVID-19 with a lot of up and downs and lockdowns, there is a lot of noise in the data. That's why we didn't accelerate before. We just want to have the right moment to do. We are not in a hurry to do that. We know it is important. We just want to do it the right way. We see some other players in the market doing some aggressive growing in the portfolio, and the NPLs will come.
We know that, you know that. The NPLs will come if you don't give the right credit for the right person, and you don't have the collection processes and so on. We just want to be ready and be confident that we can accelerate a little bit. We are ready with the BRL 700, almost BRL 800 million AUC, close to BRL 1 billion. We are growing, but step by step, not doing crazy movements here and doing step by step. We will accelerate at some point that we think it's feasible, and we are confident to do so.
That's great, guys. Thank you.
Thank you.
Our next question comes from Neha Agarwala with HSBC. Ms. Agarwala, go ahead.
Hi, thank you for taking my question. Congratulations on the good results. Most of my questions are answered, very quickly. I know you can't give more information on the hubs, it seems like the hubs are doing quite well and exceeding the expectations. What do you think are the strengths of PagSeguro which is helping you to gain clients either from incumbents or the other players? Is it the service quality? Is it the brand image? Are you doing something different on the distribution? What are your strengths in that particular segment? My second question is on the monetization of the software opportunity. I mean, you already have a good take-up, 8.5% of your client base uses software. Are you already monetizing it?
Can you give us some means what percentage of revenue comes from software, and what is the opportunity that you see here? Thank you so much.
Thank you, Neha, for the question. Let's talk first about the hubs. We always said that, and we mentioned that during the presentation that our thesis is that it's easier to go up in the pyramid than to go down when you think about the size of the merchants in terms of TPV. We started with long tail, as you know. We had all this platform that is very scalable, easy to use, self-service. We have all this online DNA here that we can serve the small clients here. When you go up in the pyramid, it's just a matter of distribution. The platform is the same, the solution is the same. The easier the solution, the better for the merchant. It doesn't matter how is the size of the merchant, but if it's easy to use, every merchant will like it.
It doesn't matter if you are a small one or a big one. It's a matter of distribution here. As I said before, we have a strong brand. We see a lot of unsatisfied merchants in the SMBs. At some point, they don't have the right service, and that's why we come there, and we can bring these merchants to us. We have good devices here. We have a portfolio of seven devices. The merchants also like our devices. There are some components here that we can use or some instruments that we can use to bring these merchants. It's not a matter of price and try just beating the price. At some point, the merchant even wants to pay you more if they have a good service. That's the dynamics behind going to SMB.
We are proving here the thesis that it's much easier to go up in the pyramid than to go down first. Talking about software, the 8.5%, a very small part of that we monetize. We are not charging the majority of them. We are giving the software for free. We think that today it's not a lot of money. Our merchant is not sophisticated to pay for a software. We are making here for free. At some point, if we see an opportunity that we can charge, we will do it. From all softwares that we have, we have some premium features from the loyalty software and also premium features from the reconciliation software.
The other softwares that we have, the point of sale that you can use, let's say, put some products, coffee, croissant, and all this stuff, and you just can have a database of clients, database of products, we are giving this for free. Today, we are not charging, just to be sincere. A very small part of that is paying for software. It could be an opportunity in the future, but we don't have that in the short-term plan.
Great. Thank you so much for that. Congratulations once again.
Thank you again, Neha. Thank you very much.
That concludes our Q&A session. I would like to turn the floor over to Mr. Ricardo Dutra for his final remarks. Please, Mr. Dutra.
Hi, everyone. Thank you very much for your time. As you could see, the company is doing well. All the KPIs are growing. Number of clients, TPV. We are seeing a lot of traction in PagBank. It seems the worst is over in terms of the pandemic. We are not 100% okay in Brazil, still waiting for the vaccinations. It seems the worst is over what we had in Q2 and Q3 last year. The future is bright. Thank you very much again. See you next quarter. Thank you very much.
The PagBank PagSeguro's first quarter 2021 results conference call is now concluded. Thank you for your participation. Have a good night, and thank you for using Chorus Call. You may now disconnect.