Zenfi raises new funding to give Mexicans some financial peace • TechCrunch
Luis Rubén Chávez, founder and CEO of Zenfi, says consumer finance in Mexico and across Latin America is “basically broken.”
“Achieving basic economic health in Mexico for about 50 to 60 million people is very difficult,” he told TechCrunch. “Two out of three Mexicans have a subprime credit score with basically no tools to improve.”
Financial technology has exploded in Mexico and Latin America in the past couple of years, driven by startups and venture capitalists, in part because founders like Chávez, whose background is in consumer finance, believe there needs to be an easier way to help people get financing without charging over 100% annual percentage rate on credit cards and personal expenses. To put that in perspective, an average APR in the US is around 19%.
So seven years ago, Chávez began building the free super app Zenfi, a financial health platform that he describes as “if Credit Karma, SoFi, Marcus and Copilot Money had a child, it would be us.”
A top feature of the platform is what he touts as the lowest interest rate in Mexico, an average of 19% APR. Zenfi also offers free credit tracking and integrates with Open Banking. It also connects to the country’s tax system so users can access tax returns and filing tools.
One of the newest features is a personal finance manager. App users answer a few questions, enter their financial data sources and get long-term personal financial planning, Chávez said.
Seven years after the creation of Zenfi, the company has more than 3 million users, many of whom use the platform to consolidate and pay off debt from another bank, he added. It has disbursed over $100 million in loans, has a default rate of 3.4% and $10 million in annual recurring revenue generated from interest, small fees associated with credit ratings and commissions from its investment products.
Not only has the company been able to demonstrate profitability with that business model, but it has also achieved it after previously raising less than $3 million.
After reaching profitability is how Chávez said the company is able to take another round of financing, this time $8.5 million in new capital led via Magma Partners. Cometa, Redwood Ventures, Polígono, Conny & Co. and an AngelList syndicate led by Peter Livingston also participated.
Chávez intends to deploy the new funds to dozens of features in the pipeline, including debit and credit products. He is also looking at three countries in Latin America where he feels Zenfi’s business model will do well. In addition, Chávez will hire more people to add to Zenfi’s 60-person team.
“Right now we have the largest fintech lending license and personal loan company in Mexico and a benchmark for volume and portfolio quality,” he added. “We are trying to make an inroad into the Mexican financial system and want to go from $100 million in loans to $2 billion, so we want to build the internal capabilities around the team and the infrastructure.”
