How Online Lenders Disrupted Mexico’s Credit Market
Getting a loan in Mexico has been historically hard—but soon may be easier as online lenders emerge to provide much-needed capital to small businesses and individuals.
New players in the Mexican financial market include a number of startups with rapid growth. For instance, Kubo kicked off in 2012 and in 2015 quadrupled both its numbers of loans issued and its total portfolio, now up to $2.7 million. While Kubo’s portfolio is not enormous and the total market for non-bank online lending in Mexico is likely to top out at around $20 million, the emergence of online lenders is important for companies working in Mexican financial markets to factor in.
Other new online lenders in Mexico include Cohete—a payday lender providing 1,500 loans every month—and Kueski, which offers 30-day micro loans (around US$200) in less than two hours. There’s also Prendanet, which may be Latin America’s first online pawnshop, along with Mimoni and Yotepresto.
Factors Driving Online Lending in Mexico
Scant access to credit is one of the key factors driving the growth of Mexican online lenders in Mexico’s financial market. Challenges include:
- Only 16 million Mexicans (18% of the population) have credit cards
- Mexico’s total mortgage portfolio was $37 billion in 2015, compared to $225 billion issued just in new mortgages in the U.S.
- Mexico’s per capita non-revolving personal loan portfolio comes to $193, compared to $1,922 in the U.S., 10 times less
- Credit card APRs in Mexico often reach the upper 50% range
- Interest rates on personal loans in Mexico usually top 40%
- Mexico has Latam’s largest middle class: 13 million adults
- Mexico’s middle class is even larger than Brazil’s (11 million) despite having only 60% of Brazil’s population
As a response to the alternative lenders arising in the Mexican financial market, BBVA Bancomer started issuing loans online in 2015. By using internal data, the bank can pre-approve customers and they can apply online. Now 30% of BBVA Bancomer’s personal loan portfolio is issued online—compared to just 2% in 2015. “With the appearance of online marketplaces for lending in Mexico, we realized we needed to become more flexible and agile, in order to compete. The world is changing; we have to interface with our clients digitally,” says Hugo Nájera, Head of Business Development at BBVA Bancomer.
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