Mexicans are not big on traditional credit cards, presenting an opportunity for alternative assessments of credit
Guadalajara microloan startup Kueski announced a massive funding series over the weekend, bringing in $35 million with the potential to increase that to $100 million. The Series A round was led by Richmond Global Ventures, Rise Capital, the CrunchFund and Variv Capital. It also included Victory Park Capital, Angel Ventures Mexico, Core Ventures Group and Auria Capital.
“We feel honored to partner with such an incredible group of investors,” commented Adalberto Flores, Co-Founder and CEO of Kueski. “Their expertise in emerging markets and online lending businesses will enable our company to advance our market leadership and launch additional products in order to position Kueski as a leader in online lending for all of Latin America.”
While a microlender, Kueski aims its business at middle class customers. Like other fintech lenders, they claim their own special analysis of a particular combination of indicators for someone’s creditworthiness. They look at applicants’ “digital footprint” and allow their algorithms to accept or reject a loan application, supposedly in seconds.
The story here is not necessarily the business model, as much as the size of the round in the country the business is located. There has a been a proliferation of online lending business models and companies for each of those subindustries. But typically London leads the conversation on online lending and peer-to-peer loans, followed by New York, Hong Kong and Singapore. There are several prominent fintech companies in the country, including Mexico City startup Rocket.la which just raised $400,000 in seed funding in October.
The major issue facing the industry is the stark contrast between credit card use in Mexico and other countries where fintech is taking off. Only a fifth of Mexicans have them and even fewer are willing to make purchases online. One might infer from that alone that it would be difficult to get an online lending business off the ground.
But without those cards, it might create a counter-intuitive opportunity. Typically scrutinized for ignoring real credit histories, machine learning and examining one’s actions online might be more necessary to evaluate someone’s loan application, especially without a formal credit record.
“Mexico is currently experiencing a historical moment in building a strong foundation for the future dominant online lending platforms to be built,” said Peter Kellner, Managing Partner of Richmond Global Ventures and Co-Founder of Endeavor Global, in a press release. “Formal credit is not available to 85 percent of the population in Mexico. When you see such an important and large market opportunity being pursued by a world class analytics team, it was a very easy decision to invest in the company.”
Besides returning investors, their near $5 million in seed money over the last two years also included funds from Ariel Poler, GAIN – the Guadalajara Angel Investor Network and the Sobrato Family Foundation.
Kueski was founded in 2012 by CEO Adalberto Flores and former CTO Leonardo de la Cerda.