Getting a credit card is something most take for granted. In countries like Mexico, it is much harder and less common endeavor. In fact, less than 20% of the population has access to some type of credit, and it is estimated that only 10% have credit cards.
In recent years, several start-ups have sprung up to offer underserved Mexicans more options in an effort to boost inclusion in the country. One of those startups is vexi. Former Citi executive Rojo Blasquez started the company in 2018 and later joined Gabriela Estrada (who also spent 9+ years at Citi), Cinthia Merlos, Salvador Michel and Carlos Franco as co-founders. All of the founders grew up in middle-class homes and are personally involved in helping Latin America's emerging middle class access better financial services, said Merlos, who serves as the company's chief operating officer.
“We all come from middle-class families here in Mexico. We went to public schools and we worked very hard to get scholarships for private schools or to study abroad,” Estrada said. "We really want to make a change, and we're seeing that change every day with our customers."
vexi describes itself as a neobank, but does not yet offer checking or savings accounts. For now, his only offer is a credit card, which he offers through American Express without using third-party issuers or processors. This helps the company earn more revenue through interchange fees, according to Merlos, up to 3 times more than startups using third parties. The offer of vexi it also includes interest-free installments, cash back, purchase insurance, and “competitive” interest rates. By competitive, I mean in the range of 29% to 79%, which in the US is considered extremely high. In Mexico, however, it falls significantly below interest rates for microloans, for example, Merlos said.
“In Mexico, only 1 in 10 people have access to a credit card, generally because they earn less than what traditional banks require or because they work in the informal economy due to a lack of formal sources of employment. That's why we compete against cash and high-interest microloans, rather than those traditional banks."
About 75% of credit card holders vexi They are between the ages of 18 and 35 and their average income is $600 to $800 per month. almost 60% of their clients are self-employed or have their own business, most of whom have reported using the cards to purchase business supplies.
Merlos and Estrada say that the company The self-developed credit scoring system allows you to offer tiered credit cards to make your loans accountable. As users prove their creditworthiness, their credit limits and scores go up while their interest rates go down. Furthermore, the couple claims that users are so eager to build up credit that they work very hard to make sure they make payments on time and don't lose their access. The app also offers educational information for users to learn more about how to better manage their finances and spending.
“Our vision is to use our technology, talent, passion and experience to break the vicious cycle where a person in Latin America cannot access the first line of credit to start their credit history and is stuck taking high interest loans that they will never be able to. recover. of,” said Estrada, executive director of vexi.
vexi It is not intimidated by competitors in the space.
"They are saying 'I want to teach people to drive a car, so we will give them a Nissan because they are learning to drive a car,'” or in other words, very basic products,” Merlos said. “But what we're doing differently is we're saying 'Okay, I'll teach you how to drive. But as long as you start driving and show that you are a better driver, I will give you a better car. One of the advantages that the company offers is to give its users a way to pay for things with credit cards using their mobile phones.
The company announces that it has raised $8 million in a round of financing from Serie A "oversubscribed" run by Magma Partners. It raised $3,7 million in a seed round and about $20 million in debt at the end of 2021. Previous investors Alpha4Ventures, Noa Capital and Pomona Impact also participated in the Series A round, along with new US-based backers Redwood Ventures and Rebalance Capital.
“We have been strong sponsors of vexi since 2020 and we decided to go ahead because the team at vexi is solving a real problem for Latin Americans. We are excited to support you in building the future of finances of the mexican society,said Nathan Lustig, managing partner at Magma.
vexi It says it will use the new funds to grow its client base, onboard new talent to strengthen the team, and improve its proprietary technology and risk algorithms. While the company declined to disclose hard revenue figures, Merlos said the company has seen its revenue grow "four times" in the last 24 months.
"We were able to get to 2.5 million applications with less than $4 million in capital raised prior to this Series A,” Estrada said. So far, the company has issued some 850.000 credit cards.
“We believe in a sustainable form of growth, a slower pace, maybe compared to other startups, but with strong, positive unit economics,” Merlos said. “This fact alone has allowed us to jumpstart during the pandemic and makes our company stronger to handle economic downturns.”
For now, vexi it focuses only on the Mexican market, which itself is huge, with a population of almost 127 million. Eventually, he plans to expand out of the country to other parts of LatAm.
Other Mexican startups in the space include consist of Story, Clear and ZenFi, Among others.
