Neobank Vexi raises millions to provide young Mexicans with lower interest credit cards • TechCrunch

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

In countries like Mexico, it’s a lot more difficult and less common business. In fact, less than 20% of the population has access to some form of credit, and barely 10% would 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 boost inclusion in the country. One of these startups is Vexi. Former Citi executive Rojo Blasquez started the company in 2018 and was later joined by Gabriela Estrada (who also spent over 9 years at Citi), Cinthia Merlos, Salvador Michel and Carlos Franco as co -founders. All of the founders grew up in middle-class households and are personally invested in helping Latin America’s emerging middle class gain access to better financial services, said Merlos, who serves as the company’s chief operating officer. ‘business.

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

Mexico-bassed 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 earn more revenue from interchange fees, according to Merlos – up to 3 times more than those of startups that use third parties. Vexi’s offering also includes interest-free installments, cash back, purchase assurance and “competitive” interest rates. By competitive, it means in the range of 29% to 79%, which in the United States is considered extremely high. In Mexico, however, it falls 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 charge or because they work in the informal economy due to a lack of sources formal employment,” Merlos said. “That’s why we compete with cash-based, high-interest microloans, rather than these traditional banks.”

About 75% of Vexi 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 run their own business, the majority of whom said they use the cards to buy business supplies.

Merlos and Estrada say the company The house credit score system allows him to offer credit cards in tiers so that his loans are responsible. As users prove their creditworthiness, their credit limits – and scores – increase while their interest rates go down. Additionally, the pair claim that users are so keen on building up credit that they work really hard to make sure they make payments on time and don’t lose access. The app also offers educational information so that users learn more about how to better manage their finances and expenses.

“Our vision is to use our technology, our talent, our passion and our experience to break the vicious cycle where a person in Latin America cannot access the first line of credit to start their credit history and finds themselves stuck at taking out high-interest loans that she will never be able to recoup,” said Estrada, who is CEO of Vexi.

The pair are undeterred by competitors in space.

“EThey say ‘I want to teach people to drive a car, so we’ll give them a Nissan because they’re learning to drive a car’, or in other words very basic stuff,” Merlos said. “But what we do differently is we say ‘Okay, I’m going to teach you how to drive. But as you start driving and show that you’re becoming a better driver, I’ll give you a better car. One of the benefits the company offers is giving its users a way to pay for things with credit cards using their cell phones.

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

“We have been strong supporters of Vexi since 2020 and decided to follow because the Vexi team solves a real problem for Latin Americans. We are excited to help them build the future of The finances of Mexican society,said Nathan Lustig, managing partner of Magma.

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

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

“We believe in a sustainable mode of growth, a slower pace maybe compared to other startups but with a strong and positive unit economy,” Merlos told TechCrunch. “That fact itself has gotten us started during the pandemic and makes our business stronger to handle economic downturns.”

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

Other Mexican startups in the space include story, klar And ZenFiamong others.

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