Analysis Featured

Marketplace lending in Mexico

Kueski is targeting the microfinance space, for the new borrowers they lend up to Pesos 2,000, for a maximum of 30 days.

The whole process is online, so no hassle of going to the bank, collect endless paperwork or wait days for approval for personal credit. In addition, the bank usually asks for a guarantee among other requirements, turning off new borrowers.

Timely repayment of loans at Kueski is awarded by bigger loans size, longer tenure and low-interest rate for recurring customers. It also helps to build a good credit rating in the credit bureau profile, which can be beneficial to get other credits such as mortgage or auto loan in the future. It is the most convenient lending platform for those who need an immediate loan. The company has become the fastest growing platform of its kind in the region and has already granted thousands of loans.

Kueski is disrupting the consumer lending industry in Latin America and changing the way credit risk is assessed with machine learning, big data, and other novel technologies and has grown ten folds year after year. The company’s portfolio has been profitable since July 2014 with thousands of loans in volume. Though initial loss rate was high, but with constant changes in the algorithm, losses have been cut down drastically.  The average rate of interest is 1.16% daily and can go down to as low as 0.5%.

Underwriting

Kueski underwriting process is first of its kind in Mexico Fintech industry. They have developed analytics with a mixture of traditional features and socio-demographic, email account info, Facebook info etc, which enables them to gather all details of the users for the internal model that they have developed.

The team behind Kueski comes from big data and analytics background that enables Kueski to provide loans to people who don’t even have a credit score. Users are able to apply online for a small loan in the range of 80-350$, specifying how much money they need and when would they like to pay it back. Kueski leverages user’s credit history, their social graph and other online information available to build a credit risk model that will approve or reject loan applications in a matter of minutes in real time.

The firm also gets detailed information from Stat Institute about socio- demographics and socio-economic characteristics of the Mexican population, thus enabling them to leverage new variables and patterns in their algorithm. They have the technology to identify the application and correlate with the address of where people work. Information is used to develop a model using topology analytics, allowing them to create predictions about their users. This proprietary analytics technology is one of the reasons why they can give credit to people who don’t have access to banks or other credit institutions.

To lower their default rates, they have also started using Machine learning. It allows them to use different variables which are strongly correlated with other demographic characteristics. This has helped them improve their default prediction by 10-20%. The company’s technology and algorithms will be the key success factor in winning the Latin American market.

Mexican market specifics

The Mexican market functions in multiple dimensions:

–    More than half of the population of Mexico does not have a bank account, presenting with a huge market opportunity for Kueski.

–    People of Mexico are technology adopters at all ages; even at the age of 60, they are creating their Facebook accounts. This population segment is familiar with the internet, online processes, and technology. Using their digital footprint, the company decides whether to lend them the money or not.

Accessing affordable capital is a longstanding problem in Mexico as 85% of the population does not qualify for a wide range of financial services such as loans and credit cards because of low or non-existent credit scores. Kueski was founded in 2012 to solve this issue and is now the fastest micro-lending service in Latin America.  If the loan is approved, a wire transfer will be made immediately. Service is simple, paperless and available 24/7.

Kueski history

Kueski, one of the leading online lenders to the middle-class demographic in Mexico was founded by Leonardo de la Cerda and Adalberto Flores and has its headquarters in Guadalajara, Mexico. Adalberto Flores was part of Ooyala, an online video technology company, which was later acquired by Telstra two years back. The founder was in charge of operations in Mexico and thus understood the credit bottlenecks in the Mexican economy. He looked at exploring an array of products like purchase financing, P2P lending, installment loans etc. but once the market needs were understood, they decided to offer short-term micro loans to the customers.

The company has raised $35 million in funding recently, of which $10 million was in equity and $25 million in debt funding, with the potential to increase up to $100 million. The Series A round was led by Richmond Global Ventures, Rise Capital, the Crunch Fund and Variv Capital. It also included Victory Park Capital, Angel Ventures Mexico, Core Ventures Group, and Auria Capital. The company has raised more than $5 million in equity in previous rounds.

Kueski aims its business at middle-class customers. Like other competitive lenders, they claim their own special analysis of a particular combination of indicators for someone’s creditworthiness. They look at applicants “digital footprint” which allow their algorithms to execute the credit approval process in minutes versus the weeks of lag time at traditional brick and mortar financial institutions.

75 million Mexicans still lack access to financial services

 

Over the past 5 years, access to bank accounts in Mexico has grown to 39%, an increase of 10% since 2010. While the progress is promising, 75 million Mexicans still lack the access to financial services needed to support their families, their businesses (SMBs), as well as to protect themselves from unforeseen financial shocks. The massive fundraising and the proprietary technology would help Kueski solve the problem of access to credit in Mexico. The team also has a first mover’s advantage to tap the massive growth opportunity in entire Latin America.

Author: George Popescu, Heena Dhir

George Popescu
George Popescu

 

 

About the author

George Popescu

Serial entrepreneur.

George sold and exited his most successful company, Boston Technologies (BT) group, in 2014. BT was a technology, market maker, high-frequency trading and inter-broker broker-dealer in the FX Spot, precious metals and CFDs space company. George was the Founder and CEO and he boot-strapped from $0 to a $20+ million in revenue without any equity investment. BT has been #1 fastest growing company in Boston in 2011 according to the Boston Business Journal and the only company being in top 10 fastest in 2012-13 as it was #5 in 2012. BT has been on the Inc. 500/5000 list of fastest growing companies in the US for 4 years in a row ( #143, #373, #897 and #1270). After the company sale in July 2014 until February 2015 George was Head-of-Strategy for Currency Mountain ( www.currencymountain.com ), a USD 100 million+ holding company focused on retail and medium institutional currencies, precious metals, stocks, fixed income and commodities businesses.

• Over the last 10 years, George founded 10 companies in online lending, craft beer brewery, exotic sports car rental space, hedge funds, peer-reviewed scientific journal ( Journal of Cellular and Molecular medicine…) and more. George advised 30+ early stage start-ups in different fields. George was also a mentor at MIT’s Venture Mentoring Services and Techstar Fintech in NY.

• Previously George obtained 3 Master's Degrees: a Master's of Science from MIT working on 3D printing, a Master’s in Electrical Engineering and Computer Science from Supelec, France and a Master's in Nanosciences from Paris XI University. Previously he worked as a visiting scientist at MIT in Bio-engineering for 2 years. George had 3 undergrad majors: Maths, Physics and Chemistry. His scientific career led to about 10 publications and patents.

• On the business side, Boston Business Journal has named me in the top 40 under 40 in 2012 in recognition of his business achievements.

• George is originally from Romania and grew up in Paris, France.

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