Neobank Vexi raises millions to offer lower-interest credit cards to young Mexicans • businessroundups.org

Getting a credit card is something most Americans take for granted.

That is a lot in countries like Mexico more difficult and less common venture. In fact, less than 20% of the population has access to some form of credit, and only an estimated 10% have a credit card.

In recent years, a number of startups have sprung up to provide underserved Mexicans with more options in an effort to drive inclusion in the country. One of those startups is Vexi. former Citi exec Rojo Blasquez started the company in 2018 and was later joined by Gabriela Estrada (who also worked at Citi for over 9 years), Cinthia Merlos, Salvador Michel and Carlos Franco as co-founders. All of the founders grew up in middle-class households and have personally invested in helping Latin America’s emerging middle class access better financial services, said Merlos, who serves as the company’s COO.

“We all come from middle class families here in Mexico. We went to public schools and worked really hard to get scholarships to private schools or to study abroad,” Estrada told businessroundups.org. “We really want to make a change, and we see that change every day with our customers.”

Mexico City-bLike this Vexi describes itself as a neobank, but does not yet offer checking or savings accounts. For now, its only offering is a credit card, which it offers through American Express without using third-party issuers or processors. This helps the company generate more revenue through interchange fees, according to Merlos — as much as 3x that of startups that do use third parties. Vexi’s offerings also include interest-free installment payments, cashback, purchase insurance and “competitive” interest rates. Competitive means between 29% and 79%, which is considered extremely high in the US. In Mexico, however, it is significantly lower than interest rates on microloans, for example, Merlos noted.

“In Mexico, only 1 in 10 people have access to a credit card, usually because they earn less than traditional banks demand or because they work in the informal economy due to a lack of formal sources of employment,” Merlos said. “That’s why we compete against cash and high-yield microcredit, rather than those traditional banks.”

About 75% of Vexi’s cardholders are between the ages of 18 and 35, and their average income is $600 to $800 per month. Almost 60% of its customers are self-employed or own businesses, the majority of whom have reported using the cards to purchase business supplies.

Merlos and Estrada say of the company Its homegrown credit scoring system allows it to offer credit cards in tiers so that the loans are accounted for. As users prove their creditworthiness, their credit limits – and scores – rise while their interest rates fall. The pair also claim that users are so eager to build credit that they work extra hard to make sure they pay on time and don’t lose access. The app also offers educational information so users can learn more about how to better manage their finances and expenses.

“Our vision is to use our technology, talent, passion and experience to break the vicious circle where a person in Latin America cannot access the first line of credit to start their credit history and gets stuck in taking out loans with high interest that he can never get back. van,” said Estrada, who serves as Vexi’s CEO.

The pair are not deterred by competitors in the space.

“EThey say, “I want to teach people how to drive, so we give them a Nissan because they learn to drive,” or very basic products in other words,” Merlos said. “But what we do differently is we say, ‘Okay, I’ll teach you how to drive. But as you start driving and show yourself to be a better driver, I’ll give you a better car.” “An advantage that the company offers is that it gives its users a way to pay for things with credit cards using their mobile phones.

And today, the company announces it has raised $8 million in an “oversubscribed” Series A funding round led by Magma Partners. It made $3.7 million in a starting round and about $20 million in debt by the end of 2021. Previous investors Alpha4Ventures, Noa Capital and Pomona Impact also participated in the Series A round, along with new lenders Redwood Ventures and US-based Rebalance Capital.

“We have been strong Vexi donors since 2020 and have decided to continue because the Vexi team is solving a real problem for Latin Americans. We are excited to support them in building the future of The finances of Mexican society,said Magma Managing Partner Nathan Lustig.

Vexi says it will use the new funds to grow its customer base, onboard new talent to strengthen the team, and improve its own tech stack and risk algorithms. While the company declined to disclose hard revenue numbers, Merlos said the company has seen its revenue grow “4x” over the past 24 months.

“We were able to get to 2.5 million applications with less than $4 million in equity before this Series A,” Estrada said. To date, the company has issued approximately 850,000 credit cards.

“We believe in a sustainable way of growing, maybe at a slower pace compared to other startups, but with solid, positive unity economics,” Merlos told businessroundups.org. “This fact in itself enabled us to start up during the pandemic and makes our business more robust to deal with economic setbacks.”

For now, Vexi is only focusing on the Mexican market, which is huge in itself – with a population of nearly 127 million. Eventually, it plans to expand outside the country to other parts of LatAm.

Other Mexican startups in the space include Stori, Clear And ZenFiamong other things.

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