The Mexican startup Kueski is an online lending company that became known for its “Kueski Cash” product – an almost real-time microloan focused on the country’s middle class. Since the beginning of the COVID-19 pandemic, however, another product from Kueski has gained traction: “Kueski Pay”, a feature that works in the ‘buy now, pay later’ model, and offers the customers a chance to finance their purchases and even buy in installments without a credit card.
Such business model has made the Melbourne-based firm Afterpay grow (with its 10 million customers in the US, UK, and Australia) amid the e-commerce boom caused by the COVID-19 pandemic. PayPal and the Swedish Klarna are also gaining new global markets with this kind of solution. In Mexico, Kueski is fighting to capture these market share betting on the recurrence of its customers.
Founded in 2012 with the premise to offer better interest rates and conditions than traditional credit cards in Mexico, the startup has granted 3.4 million loans for more than 580,000 unique customers so far.
In talks with LABS, Kueski’s CTO Jaime Romero explained that when Kueski was founded by Adalberto Flores and Leonardo de la Cerda, Mexicans had even less access to financial services than today. “Nowadays we have about 60% of the population that does not have access to regular banking services in Mexico and about 82% of the population that does not have access to a credit card,” he stated, adding that this happens because traditional banking institutions require proof of income and a good credit score to grant any type of credit, two things that an informal worker is unlikely to provide.
Currently, 54.9% of Mexico’s population is in the informal economy, according to end-September data from the country’s National Institute of Statistics and Geography (Inegi) – this proportion was higher before the pandemic (58.2%, on average, in the last 15 years), and decreased because the drop in informal employment was greater than the reduction observed in formal employment.
To solve the credit access gap in Mexico, Kueski has been deploying big data and machine learning techniques to reach users’ credit history, their digital footprint, and other online information available to build a smarter credit risk assessment, able to approve or reject micro-loan applications (of around $100) in minutes.
Without giving exact figures, Romero says that “Kueski Cash” has allowed the startup to grow seven times annually, since its launch. With the COVID-19 pandemic, however, the startup does not expect to scale its operations at the same rate. In May, the Mexican platform had to layoff employees as business slowed down due to the economic downturn. Currently, the company has 223 employees, under a working-from-home scheme.
“Initially, we wanted to be very cautious and we started to reduce the advertising campaigns (that were put on hold) in order to have control over the traffic, but a few months later we were very successful to navigate things through uncertainty,” told Romero.
During the critical period of the pandemic, Kueski has managed to adjust dates for the payment of the loans by negotiating terms with its customers. “We were successful in identifying things that would work in this environment and the business is growing. It also allowed us to accelerate in other products. “Kueski Pay” started to lose strength in the last six months, so we put efforts to develop this product. We will also launch a third product in the coming months,” he said.
Fintechs are the new normal in Mexico
Richmond Global Ventures, Rise Capital, CrunchFund, and Variv Capital are the investors of Kueski. The startup has raised its Series B round last year and might raise a Series C next year to continue building new products. “We are still discussing it with the board and preparing for 2021,” said Romero.
For the coming months, the number one priority for the fintech is to scale the Kueski Pay feature, and financial resources will be key for that. The second goal is to continue building Kueski’s products ecosystem with four to five more products according to Romero. “Kueski has given opportunities to Mexicans. We want to give users access to different tools and we want them to trust us. The tech is what is enabling us to do that,” he said.
Romero is in charge of instrumentalizing the company’s core vision with the team of engineering. Before joining Kueski, he co-founded Wepow, where he led the development of a recruitment video platform. Romero also worked as a software tech advisor in India, the U.S., and Mexico for companies like Citibank and FedEx. Now, he is thrilled to be part of the fintech wave in Mexico.
Expansion for other Latin American countries is something that is in Kueski’s roadmap, but right now the firm has been focusing on its headquartered country. “We see that the Mexican market for fintechs is booming. Digitization in Mexico has been taking place for these years but I guess that, given the circumstances that we’re living in right now, this is accelerating. We’re seeing a huge increase in e-commerce for example, and when it comes to fintechs we’re also seeing that it’s the new normal, people don’t want to go out, and go to banks, and exposing themselves.”
How Kueski Pay works
“Kueski Pay” needs to be offered by the store or marketplace where the consumer is buying. It will appear among the payment options. When clicking on this option, the customer will be redirected to a registration screen. Kueski promises to say in minutes whether the customer’s order has been accepted or not. Later, he or she will receive an email about how and when to pay the loan made at Kueski having three options: OXXO (a voucher containing a barcode that can be paid physically at thousands of OXXO convenience stores in the country), bank transfers, or cash deposits in ATMs from BBVA Bancomer.