In one of the most underbanked economies in Latin America, Kueski has made a name for itself by lending to the financially excluded.
Founded in 2012, it claims to be one of the largest BNPL firms in Latin America. It reports 1.7 million unique users and more than 9 million loans disbursed since its inception, totaling $1.4 billion in transactions.
It has two distinct products, including low-ticket personal loans to Mexicans with little traditional financial records and a Buy Now Pay Later initiative which has proliferated on the back of e-commerce trends.
The company has been growing the latter at a rapid pace. Kueski reports its online payment tool – which allows users to split payments in up to 12 installments – now accounts for roughly 5% of all e-commerce purchases in Mexico.
In an interview with Fintech Nexus, senior Marketing and Growth director Regina Moreno discussed the outlook for fintechs in Mexico and the opportunities that prevail even against a backdrop of credit risk and a looming recession in the United States.
The outlook is leading many fintech companies to adjust costs and tighten requirements around new loans. According to Moreno, the current phase demands a balancing act between sustained growth and profitability as fintechs brace for a possible recession.
Amid a more generous environment for tech companies, the lending-based startup amassed over $320 million so far in debt and equity funding, according to Crunchbase. Moreno said that this has provided enough runway to face a downturn, yet the company is working to straighten out costs.
How is Kueski reacting to the more adverse scenario?
We feel very safe with the runway that we have today. Our position for 2023 is a very strong one, although there are a lot of challenges. The recession is likely coming. Gladly, it hasn’t yet hit us as we expected. But we have been preparing for the past six months to face it. And we have done many things to keep growing despite the current global situation.
What actions have you taken as you brace for a recession?
Since the last quarter of 2022, we have had to make many optimizations to our budget. We are trying to keep both growth and profitability at the same time. So, it’s a huge challenge for all the teams. Our main priority is to lower costs, so we have been making many changes.
What does the credit landscape look like in Mexico right now?
People need money and are looking for places to get a loan. We are seeing a massive increase in the requests, way more (than we used to have). But our quality requirements are now higher, as we are more careful with the clients that we lend money to. There is a huge opportunity on the loan side, but we are very cautious. It should be balanced. We are improving the quality of our users.
What future products are in the pipeline? Is there still room to grow in this environment?
Right now, we have three betas running. But they are still very early, and we will implement them next quarter. Kueski is an ecosystem. We have three strong products today. The idea is to end the year with at least five.
What makes Kueski attractive in the market as it is becoming increasingly crowded?
We have more than 10 years of experience in the Mexican market. Our algorithm has been learning for over a decade, allowing us to lend (to users) without a bank account. That’s a key part of our strengths. In Mexico, around 40% of the population does not have a bank account, and only about 30% have a credit card. So there is a huge opportunity to reach all the people that have no access to a bank. Banks in Mexico are complicated. The amount of credit you get from a regular bank is very, very low until you can prove that you have a very high income. Many people in Mexico do not have a way of demonstrating that because many get paid in cash. So you might have a good salary, but half is paid in cash. That way, they have no way of demonstrating that they have enough money.
How would you regard competition in the Mexican market?
There are a lot of competitors, although many of them have left the market. Also, some international competitors considering entering the Mexican market are no longer doing so, or at least they do not seem to have plans. U.S. and Mexican markets are entirely different in the way of financial education and in the way people in Mexico pay. Not knowing the Mexican profile very well is hard when competing. It’s a challenge for many prominent international BNPL companies.
What are Kueski’s plans to grow BNPL in e-commerce?
We now represent around 5% of all e-commerce sales in Mexico and are still very new (in the market). We partnered with the (local e-commerce association), and the idea is to grow even more. Whenever you go to checkout, there’s now an option that you can pay with Kueski Pay and split payment in up to 12 installments. That way, we help increase the ticket size by around 40% now that users can defer payments.
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What would you sum up as one of the greatest challenges in Mexico?
There is not as much financial education as we would like in Mexico. The biggest competitor that we have today is still cash. Our challenge is how we can make people use Kueski instead of it.