Introducing Cuenca
In Mexico, 75% of people either don’t have a bank account or only use their account to receive money and withdraw every last peso on payday¹. And, a majority of those who have bank accounts, 20% of the population, typically pay painful fees and don’t receive service the wealthiest 5% do. In comparison, with over US$25,000 in deposits, you can earn 8% – 10% in annual interest and avoid having to pay fees.
I founded Cuenca in January 2018 to address this problem by creating a radically different service for the underserved 95% of Mexico. The Mexican government further opened up the market by passing a law called La Ley Fintech, just two months after our founding, creating a regulatory framework for startups to operate as financial institutions and hold customer deposits. It gave us leverage by reducing our dependence on banking partners and provide a level of service never before possible in Mexico.
Enter Andreessen Horowitz and Kaszek
In April 2018, three years after selling a Y Combinator-backed FinTech startup I co-founded, I realized it was the best time in history to revolutionize banking in Mexico. There was no time to waste!
I reached out to over 50 investors and flew back to San Francisco with the goal of brining on a backer who could help us accelerate our development. Most investors balked at the idea of an Iranian-American who had never lived in Mexico and spoke broken Spanish to go head-to-head with the Mexican banks.
Andreessen Horowitz (a16z) and Kaszek, a VC firm focused on Latin America and cofounded by two of the cofounders of MercadoLibre, had a different view. N26, Monzo, and Revolut had proved it was possible to take on the banks in Europe and Chime was doing the same in the US. It was only a matter of time the same happened in Mexico, a country in which 5 banks hold over 90% of the bank accounts!
By the end of April, a16z and Kaszek committed a combined $2mm based on a pitch deck, a legal opinion, a basic service that was built on top of WhatsApp, and no other full-time employees or cofounders. Game on!
Building
The challenges of building a FinTech startup in Mexico began to slowly sink in a few weeks after my arrival. Recruiting in particular was especially challenging. But, we now have a team of 16 people, including 9 engineers, but we only hire 5% of the engineering candidates we interview with an obsessive focus to keep a high standard and maintain a Silicon Valley working culture while still having the heart and empathy that comes from Mexican culture. We’ve had to pass on experienced, super talented candidates because we felt they wouldn’t be able to adapt to our company culture and working style.
We’ve also maintained a strategy of reducing intermediaries as much as possible to increase our flexibility and improve unit economics—giving us the ability provide a service where our customers are not required to hold a minimum balance or pay us fees².
One area where we’re particularly proud of is a partnerships we’ve established with a cooperative of over 100 women in Tenango de Doria, a small town three hours northeast of Mexico City, to produce unique hand embroidered sleeves that hold the Cuenca Visa card in the packaging sent to customers.
Now
We’re offering a service where customers can sign up in a few minutes using nothing more than their ID. Customers immediately receive a virtual Visa card that they can use with online or mobile merchants (like Uber and Amazon) and a Mexican account number they can use to receive deposits (including payroll).
The most exciting parts are offering services that are possible because we’re in Mexico. Specifically, the Mexico City metro area is a massive sprawl (the Iztapalapa borough alone, for example, has more residents than the entire SF Bay Area!) that we can use couriers on motorcycles to deliver the physical Visa card in under 90 minutes to a potential market of 25 million people! Cuenca also allows you to transfer money in real-time, 24/7 (including weekends and holidays) to any Mexican bank account for free. That would be impossible in the US.
Focus, focus, focus
The progress of building Cuenca has been particularly special because the entire team consists of avid customers. For many of us, Cuenca is our only account in Mexico. We build features for ourselves. If there’s a bug, we’re online Saturday night fixing it.
We’ve internalized an insight shared many people in Silicon Valley like Reid Hoffman and Sam Altman where you should focus on the 100 users that love you, not one million that kind of like you.
Success for us means providing a 10x better service than what exists and to improve the lives of our customers.
Join us
If you’re interested in joining us at Cuenca, you can reach me at bXRhbWl6aUBjdWVuY2EuY29t.
¹ Don’t ever use an ATM in Mexico on payday (typically the 15th and30th)—unless you want to wait in line for over 30 minutes!
² The only fees are the commission banks charge to withdraw money from their ATMs.
