Aside from the pure convenience they offer, most buy now, pay later (BNPL) operators position themselves as a way for consumers to make a payment without having to use their credit card or dip into savings. It’s a solid value proposition with proven universal appeal across the globe, although that’s far from the only enticing aspect.
Indeed, BNPL is emerging as a solution for millions of unbanked and underbanked customers across the world to start accessing financial services for the first time — particularly in developing economies, where a large segment of the population tends to work in the informal economy. That’s the opportunity that Mexican BNPL provider Kueski is chasing.
“The potential we have is we’re not only solving the credit aspect; we’re also solving the payment aspect as well,” Kueski CEO Adal Flores said in an interview with PYMNTS’ Karen Webster.
Flores said the reality is that most people in Mexico — and, indeed, most of Kueski’s customers — are unbanked. Cash still accounts for more than 90% of transactions and most consumers don’t have a credit card. Kueski’s BNPL product, Kueski Pay, offers consumers not just an opportunity to buy something with repayment in installments over time, but an opportunity to integrate into the financial system, build up a positive credit history, and then start accessing other banking services if they need them.
Much More Than Microfinance
Mexican consumers seem eager for this opportunity. Kueski, which closed a hefty $202 million funding round this month, reports that its gross merchandise volume (GMV) growth more than doubled in the last year. Since launching in 2012, the company has issued more than 5 million loans through Kueski Cash and Kueski Pay.
Read more: Mexican BNPL Platform Kueski Snags $202M
Kueski, as a provider of credit, has been around much longer than that. The financial services platform was founded in 2012 as a microfinance service, Kueski Cash.
“When I started the company, BNPL was the original idea, but I didn’t feel the market was ready in terms of eCommerce adoption and smartphone penetration, etc.,” Flores said. “So, we started the microfinance product in order to build a database to understand consumer behavior and build our underwriting model.”
It was a successful tactic for Kueski, which has seen the adoption of its BNPL offering take off, growing to become much larger than Kueski Cash in terms of volume, less than two years after launching.
See also: Why Buy Now, Pay Later Is Sweeping the Globe
Like all BNPL providers, Kueski uses a different credit scoring model than traditional banks. There are few barriers to signing up, with customers having to either provide their bank account details or pay a cash deposit the first time they use the service.
The company gives customers a choice of repayment schedules, with four interest-free installments over a maximum of six months, or even longer terms with very low interest. It’s also flexible with its repayment options, offering customers the chance to make those payments through direct debit, wire transfer or cash at a store.
Facilitating an Economic Shift
While many lenders consider the cash payment option to be a risky one, Flores said it’s necessary for Kueski to serve those consumers who opt to use cash as a preferred payment method.
“In Mexico, most people work in the informal economy, and they don’t want to open or use a bank account,” Flores said. “So, we don’t want to force them to use a bank account. We can enable someone who is 100% outside of the formal economy to start accessing credit.”
Read also: FinTech Pressures FI Giants to Strengthen SMB Lending in Mexico
Risky, perhaps, since repayment isn’t linked to an auto debit of a consumer’s account on a specific day and time, but Flores said he’s very happy with the repayment rates across the board, including with cash-paying consumers.
As for why, Flores said it comes down to offering consumers a service they see as extremely valuable — and don’t want to lose access to.
“If consumers value our service and they have to default on someone, typically they decide to default with someone else, not us,” he said. “It’s because they really want to continue using our service.”
Looking ahead, Flores said he believes Kueski can build on this loyalty, creating partnerships that will move the nation toward the cashless economy, much as Alipay did in China.
Ultimately, he said, “We want to facilitate the financial lives of people in Mexico.”
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