Oyster is a Mexican neobank
Oyster is a Mexican neobank focused on SMBs and individual entrepreneurs. Image: Oyster/Courtesy.

Oyster Financial, a neobank partner for Mexican SMBs, rolls out instant and revolving credit

As of today, Oyster now offers instant credit, ranging from US$500-$1,500, to registered businesses once they open a free Oyster business account, a process that takes only 24-48 hours

That giant rushing sound you hear could be a collective sigh of relief from small business owners across Mexico. Today, Oyster Financial, a leading neobank for SMBs in Latin America, announced a major first: access to affordable instant credit and revolving credit lines specifically designed for small to medium-sized businesses in Mexico that have struggled for a year during a crisis caused by the COVID-19 pandemic.

As of today, Oyster now offers instant credit, ranging from US$500-$1,500, to registered businesses once they open a free Oyster business account, a process that takes only 24-48 hours. Compare that to the 4-6 months it can take to open a business account at a traditional banking institution and the value becomes immediately apparent. Especially when only eight of 10 SMBs ever qualify for credit in Mexico.

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What’s more, within only a few months of opening an account, active Oyster customers may be eligible and approved for revolving credit lines up to US$5,000. “Active customers” simply means those who regularly use their Oyster business account to pay vendors, meet payroll, accept payments or other business-related transactions. 

This first-time access to instant credit for the vast majority of Mexican SMBs comes at a critical point in time. Latin America’s second-largest economy after Brazil saw one million small businesses permanently shutter their doors in 2020. That’s 25% of the country’s small businesses.

Mired in bureaucracy, caused by factors including a long history of money laundering and other financial crimes, opening an account at a traditional bank requires an inordinate amount of time and documentation. If you also want credit, that requires a separate, drawn-out process that requires a lot of paperwork and verifications. Oftentimes, Mexican SMBs need to make multiple in-person visits and stand in long lines, much like the dreaded need to go to a Department of Motor Vehicles in the U.S.

Amanda Jacobson, Chief of Staff at the Mexican fintech Oyster Financial Photo: Courtesy.

Why is banking and gaining access to basic financial services in Mexico so difficult? Amanda Jacobson, who serves as chief of staff at Oyster, likens innovation at traditional banks to navigating a ship.

When you try to move a titanic ship in any direction, it takes a lot more energy and effort to turn the ship around. It’s simply not as agile 

Amanda Jacobson, chief of staff at Oyster.

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Now consider the aging technology infrastructure of older institutions that started 50-100 years ago. Jacobson explains that, as technology evolved and banks created new products, they layered new databases on top.

“Those legacy systems can’t communicate with each other and neither can the people,” said Jacobson. “A company (traditional bank) can create a new product offering but, because of this disconnect, the service agents who speak with the customers may not even know how to onboard the products.”

How is Oyster able to make banking and credit available to small businesses so easily? It starts, said Jacobson, by understanding the context of an individual business — what it does and what it needs — and then providing that business with the tools that support its financial and business wellbeing. It also helps that Oyster is more of a speedboat than an ocean liner.

“Oyster started from zero, and it’s much easier to create new products with a clean infrastructure,” said Jacobson. “We built our technology to communicate, share information and facilitate a smooth transfer of data to different products.”

The combination of opening a bank account within 48 hours and being able to access instant credit is a game-changer. But let’s talk about affordability. Exactly how much will this game-changer cost SMBs?

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As with any financial arrangement anywhere, various factors come into play. Let’s get some perspective. According to Jacobson, a business credit card in Mexico costs about 18.6% in monthly interest on average, which is more than 200% APR. She adds that the rate for a revolving credit line in Mexico currently runs about 165.6% per year.

“Our goal is to be much below market rate, somewhere around 50% annually although, depending on the credit score and how well we know the customer, it could be around 100%,” said Jacobson. “While that may sound like a lot, we’re doing our best to stay below market rate and really be affordable for businesses.” 

Oyster’s focus on providing small businesses with quick access to financial tools that help them move beyond survival into growth may have its roots in real-world frustration. It took 20 months for Vilash Poovala, an established businessperson and the Oyster’s CEO, to get a business debit card. What could possibly take that long? Jacobson explains.

“It comes back to the technological systems traditional banks use. They’re so antiquated that they couldn’t connect his debit card to the right bank account.”

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During the last 12 months, one out of every four Mexican SMBs closed due to economic fallout from the pandemic, and those that remain open receive little in the way of support from government agencies. Instead of facing a mountain of red tape, Jacobson believes small business owners need and deserve a faster, easier way to access an ecosystem of financial products.

“We’re your partner,” said Jacobson. “We go from giving you the debit account, to giving you credit, to giving you other products that help you get paid. You get to focus more on what you love — building your business — and less on all the handiwork of your finances.”