Neobank Vexi raises millions to offer young Mexicans lower-interest credit cards • TechCrunch

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

In countries like Mexico, there is a lot more difficult and less common attempt. In fact, less than 20% of the population has access to some form of credit, with an estimated 10% having credit cards.

In recent years, a number of startups have emerged to offer underserved Mexicans more options in an effort to increase inclusion in the country. One such startup is Vexi. former Citi CEO Rojo Blasquez started the company in 2018 and was later joined by Gabriela Estrada (who also spent more than 9 years at Citi), Cinthia Merlos, Salvador Michel and Carlos Franco as co-founders. All founders grew up in middle-class households and are 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 very hard to get scholarships to private schools or to study abroad,” Estrada told TechCrunch. “We really want to make a change, and we see that change every single day with our customers.”

Image credit: Vexi

Mexico City-based Vexi describes itself as a neobank, but does not offer checking or savings accounts – yet. Currently, its only offering is a credit card, which it offers through American Express without using any third-party issuers or processors. This helps the company earn more revenue through brokerage fees, according to Merlos – as much as 3 times that of startups using third parties. Vexi’s offer also includes interest-free installments, cashback, purchase insurance and “competitive” interest rates. By competitive it means in the range of 29% to 79%, which in the US is considered extremely high. In Mexico, however, it falls significantly lower than microloan interest rates, for example, Merlos noted.

“In Mexico, only 1 in 10 people have access to a credit card, usually 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,” Merlos said. “That’s why we compete against cash and high-interest microcredit, rather than against the traditional banks.”

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

Merlos and Estrada say the company’s homemade credit scoring system allows it to offer credit cards in tiers so that lending is responsible. As users prove their creditworthiness, their credit limits – and scores – increase while interest rates decrease. 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 that users learn more about how to better manage 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 is stuck taking out loans with high interest that they can never get back from,” said Estrada, who serves as CEO of Vexi.

The pair are not deterred by competitors in the room.

“ThThey say, ‘I want to teach people to drive, so we’ll give them a Nissan because they’re learning to drive,’ or in other words, very basic products,” Merlos said. “But what we do differently is we say ‘Okay, I’ll teach you how to drive. But as you start driving and as you show you’re becoming a better driver, I’ll give you a better car.’ One advantage the company offers is to give users a way to pay for things with a credit card using their mobile phone.

And today, the company is announcing that it has raised $8 million in an “oversubscribed” Series A funding round led by Magma Partners. It secured $3.7 million in a seed round, and around $20 million in debt from Accial Capital at the end of 2021. Previous investors Alpha4Ventures, Noa Capital and Pomona Impact also participated in the Series A round, along with new backers Redwood Ventures and US-based Rebalance Capital.

“We have been strong Vexi supporters since 2020 and decided to follow through because the Vexi team is solving a real problem for Latin Americans. We are happy to support them in building their future The economy of Mexican society,” said Magma Managing Partner Nathan Lustig.

Vexi says it will use the new funds to expand its client base, bring on new talent to strengthen its team and improve its proprietary technology stack and risk algorithms. While the company declined to disclose hard revenue numbers, Merlos said the company has seen its revenue grow by “4x” in the past 24 months.

“We were able to reach 2.5 million applications with less than $4 million in equity raised before this Series A,” Estrada said. So far, the company has issued around 850,000 credit cards.

“We believe in a sustainable way of growth, a slower pace, maybe compared to other startups, but with solid, positive unit economics,” Merlos told TechCrunch. “This fact in itself allowed us to start up during the pandemic, and makes our company more robust to deal with economic downturns.”

For now, Vexi is only focused on the Mexican market, which itself is huge – with a population of almost 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 others.

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