Top Ventures Improving Access to Financial Services in Mexico
Last November, the Village Capital team united 20 thought leaders to identify the key financial inclusion challenges in Mexico.
Some common challenges soon emerged for would-be FinTech innovators across the country: antiquated credit scoring methods; inability to identify users; and sub-par infrastructure that prevents access to both online and brick-and-mortar financial institutions.
With support from our core program sponsors PayPal and BlackRock and our local partner Crédito Real, we spent the last three months boiling the financial technology ocean to identify the top 11 early-stage ventures in Mexico that are working to address these challenges and improve access to finance for the unbanked, underbanked, and small and medium enterprises (SMEs).
When applications closed on February 1, we had received over 100 applications (a 22% increase over our program last year)! The submissions included 50 ventures with female co-founders, and nearly half flowed in from Mexico City, with the remaining applications spanning 13 Mexican states and several foreign countries. Although we focused recruitment on Mexico, we were thrilled to receive 26 applications from foreign countries, including: Colombia, Argentina, Venezuela, Guatemala, Peru, Chile, the United States, China, and even Estonia. With even foreign ventures driven to apply, Mexico must be a magnet for FinTech innovation in the region.
From 100 down to just 11, we’re now unveiling the ventures selected to participate in Village Capital: FinTech Mexico 2016:
- AhorroLibre (Tijuana) formalizes traditional tandas (money pools), as well as low-cost financial services to the emerging middle class. By making finance easily and fully accessible to any smartphone user, they plan to cut down the average interest rate by 10x for the middle class.
- Contarte (Tijuana) is a friendly cloud accounting system that allows small business owners and their accountants to interact and learn. Through their digital accounting service, they educate users, in turn promoting smart financial decisions and use of resources for small business owners in Mexico.
- ePesos (Monterrey) offers a revolving line of credit available 24/7 to small business with minimum requirements, as well as value-added services like P2P mobile transfers, airtime top-ups, and bill payments. ePesos recognizes that SMEs lack the capital to prosper, and it aims to democratize credit so that their customers can become more competitive.
- Mercado de Crédito (Mexico City) is an online loan comparison tool, in which people access transparent information to make the best decisions for their personal needs. The tool aims to educate Mexicans to make better-informed decisions when selecting a financial product, like a credit card or business loan.
- mexBT (Mexico City) uses blockchain technology for cross-border payments among emerging economies. By decreasing rates for cross-border transfers, remittances will become easier, and SMEs will grow more quickly and smoothly.
- MR Presta (Monterrey) produces credit scores using non-traditional data sources for a fast and cost-effective risk assessment of micro- and small businesses, focused on eCommerce purchases to its clients’ revenues — as much as double — and business size due to access to previously unobtainable capital.
- Proyecto PYME (Querétaro) provides credit to entrepreneurs and micro-business by using innovative credit scoring based off a sociological algorithm, combined with a biometric component and unique distribution services. In a survey of current borrowers, Proyecto PYME found a 210% increase in sales and 69% increase in jobs for both entrepreneurs and micro-businesses.
- Salud Cercana (Mexico City) is Mexico’s first integrated delivery health system. It democratizes access to health with technological, financial, and service innovation. In its Theory of Change, it believes that through its services, it will incentivize healthier behavior in patients, producing an increase in healthcare management, and a decrease in out-of-pocket expenditures, in turn generating better health outcomes and fewer diseases.
- Tenoli (Mexico City) operates and modernizes a network of mom and pop shops at the base of the pyramid through three pillars: train and inform, provide resources and technology, and generate new business opportunities. It aims to increase the productivity and income of 10,000 entrepreneurs by 2019 — serving over 50,000 individuals — improving incomes, skills, access to public services, and self-esteem of shopkeepers and their families.
- UnDosTres.com.mx (Mexico City) lets users pay for cell phone recharges and other bills instantly and safely, while offering coupons to help users save money with every payment. Their goal is to build a mobile wallet to enable financial inclusion in Mexico, and ultimately across Latin America.
- Visor ADL (Mexico City) helps lenders proactively identify high-potential SMEs right when they need financing by pre-screening the SMEs for credit and behavior scores and partnering with multinationals to support the businesses in their supply chains. With Visor’s support, SMEs will survive longer, grow faster, and employ more people to develop the economy.
With 75 million unbanked individuals in Mexico and 5 million SMEs, these ventures clearly have a hungry market and plenty of challenges to face ahead.
A snapshot of FinTech in Mexico
For three months, the VilCap team worked around the clock with a clear goal in mind: Find every single FinTech venture in Mexico, and determine which ones have the most potential impact on financial inclusion.
In reviewing 500 companies in the greater FinTech space in Mexico, we found that 330 of the ventures fell into 13 categories, with the most activity in loans, payments, cryptocurrencies (inc. bitcoin), eCommerce, and SME support:
Our experience running a program for FinTech ventures in Mexico in 2015 gives us high hopes for the 2016 cohort.
In 2015, the Village Capital FinTech: Mexico cohort included 12 innovative ventures from across the region, which went on to serve
- 1,175 low income micro-merchants (plus some 7,000 other SMEs),
- 800 low income workers through remittances,
- 1,500 patients to afford health services, and
- 3,000 women with access to financial services.
They also went on to process US$110,000 in deposits and disburse US$70,000 in loans.
During the program, participants ranked Credilikeme and Billpocket as the two ventures that most deserved the US$50,000 investment from VilCap Investments and our Latin America co-investor, Pomona Impact. Credilikeme sells a gamified personal loan experience to improve living standards for digital savvy borrowers, uses alternative credit scoring to increase access to affordable loans. Billpocket is a financial platform that allows everyone to accept card payments anytime, anywhere with a mPOS (mobile point of service) that operates 5 major credit card bands.
Ventures like Credilikeme and Billpocket are proving that businesses don’t need to compromise profit to have an impact.
For example, 30% of Credilikeme’s users are thin-file, first-time formal loan recipients, and the company recently closed their Series A for MX$40 million (about US$2.2 million). Billpocket supports over 20,000 active SMEs in Mexico, and is already in the process of closing its Series B.
BlackRock recognizes that to make the FinTech sector in Mexico sustainable in the long-term, it needed to jump into the ring to support innovative ventures like last year’s peer-selected teams.
According to Armando Senra, the head of BlackRock Latin America and Iberia Region,
“BlackRock is excited to sponsor Village Capital’s FinTech 2016 program that syndicates education, mentorship, and funding, enabling entrepreneurs to implement innovative solutions that will fuel further growth throughout Mexico. Our commitment to Mexico continues to strengthen, and we are excited to grow our presence as an education partner to young talent who will bring more bandwidth into the local ecosystem.”
On a similar note, this year’s cohort is in line to have a substantial impact on the financially underserved, especially on small and medium enterprises, which half of the selected enterprises view as their primary customers. That’s why PayPal also got involved with Village Capital this year.
According to Blas Caraballo, Country Manager of PayPal Mexico and Advisory Board member for this year’s program,
“PayPal has always been close to SMEs, therefore supporting the entrepreneurial ecosystem is one of our priorities. We are committed to providing available tools in the digital payments arena that will help these companies grow, strengthen and be able to survive their start-up phase. Supporting this FinTech program helps us reach those entrepreneurs that are willing to face the challenges of a new way of doing businesses. We like to be perceived as allies that help them focus on their their businesses.”
Village Capital, alongside sponsors PayPal and BlackRock, is looking forward to supporting the growth of the participating 2016 ventures by developing their network and skills to help them achieve the impact we know they are capable of.
