Albo Raises $19M Series A to Scale Mexico’s Largest Neobank, Mexico Says ‘Red Lines’ Must Be Respected in U.S. Trade Deal, Recap of FINNOSUMMIT Miami by LendIt Fintech, and More from LatAm
Other featured stories include: WalkMe Raises $90M For Digital Adoption Platform and Eyes Latin American Market, Jeff Bezos-Baked Chilean Foodtech NotCo Expands Products in Brazil, and How Nubank is Changing the Way Brazilians Bank.
Albo Raises $19M Series A to Scale Mexico’s Largest Neobank
Mexican neobank Albo has secured a US $19 million extension to its Series A financing, led by U.S.-based Valar Ventures. The startup previously raised $7.4 million at the beginning of 2019, subsequently bringing the company’s total Series A funding amount to $26.4 million.
This investment marks one of the larger early rounds for a Mexican startup. Albo joins the ranks of other Mexican startups that have raised impressive Series A rounds. Last October, mobility startup Grin raised a $45.7 million Series A, while digital banking startup Klar raised $57.5 million in debt and equity seed funding.
Albo is a Mastercard debit card and a personal finance app that allows customers to open a bank account in five minutes through a mobile (and brancheless) experience.
The challenger bank tech startup concept is one of the most lucrative opportunities in Mexico, in that traditional banks don’t properly serve the Mexican population.
As reported by Tech Crunch, of the 130 million population of Mexico, 45% are underbanked.
“While underbanked users have access to bank accounts, deep financial products designed to help them compound wealth through lending and savings features do not exist in the Mexican market through traditional banks.”
Albo says it owns the market share in Mexico with 200,000 monthly active customers who are spending and making transactions in its platform (Tech Crunch).
Albo is not the only consumer neobank platform in the country, however. Brazil’s Nubank, one of the most high-funded startups in the region, expanded into Mexico in May. Not only does this pose a threat to Albo, but also to European startups like N26 and Revolut that have reportedly had their eye on expanding into Mexican market.
CEO Angel Sahagun says that while there may be some overlap in Nubank and Albo customers, the serve offerings are different. Nubank issues credit cards for people with existing credit history, which is a different target customer than Albo.
With a new Mexican fintech product launching or getting funded seemingly every day, the market is growing saturated.
While this is great for both the ecosystem and consumers to have so much competition, it will also create challenges around acquiring customers and hiring. Additionally, fundraising will become increasingly difficult for newcomers looking to enter the Mexican fintech space.
In the meantime, founders are taking more of a collaborative rather than competitive stance.
“This isn’t a winner takes all market,” said Sahagun, arguing that the financial market in Mexico is diverse enough to thrive with numerous financial products (Tech Crunch).
According to Sahagun, the capital will be used to expand leadership roles and speed up customer acquisition, in addition to building out new features including a savings product that lets users improve spending and saving habits, and a transparent and easy-to-use lending option for customers who want access to loans.
Mexico Says ‘Red Lines’ Must Be Respected in U.S. Trade Deal
Mexican Foreign Minister Marcelo Ebrard said that changes to the NAFTA successor trade deal with the United States and Canada must respect Mexico’s “red lines” as negotiators push to complete their work.
On Sunday, Ebrard told reporters that he briefed the Senate on the position of President Andres Manuel Lopez Obrador’s government to reject a U.S. demand for American labor inspectors south of the border.
Photo Courtesy of Bloomberg
As reported by Bloomberg, he said a U.S. proposal for steel in cars to originate in North America “would only be acceptable if implemented after more than five years, and a demand on aluminum is impossible for Mexico to meet.”
Ebrard added that Mexico’s chief negotiator, Jesus Seade, will communicate to the U.S. the points that are non-negotiable, and any changes will be addressed in a deal addendum.
Ebrard and Seade also briefed senators on other issues, such as rules for the environment and biologic medicines.
After the briefing, majority leader Ricardo Monreal said that the Mexican Senate - which already ratified the accord in June - will be on standby to approve needed changes in the agreement.
“We haven’t brought any other topic into discussion, because 90% of the treaty isn’t subject to discussion or revision…What we’re going to have is an addendum, and that addendum is with these red lines,” Ebrard said.
Bloomberg reports that last Saturday, negotiations on the agreement reached a pivotal phase in Washington, as the Trump administration sent House Speaker Nancy Pelosi a proposal for changes to the deal for review.
“The USMCA, a revamp of the decades-old North American Free Trade Agreement, was signed by all three nations more than a year ago. For months, the White House and House Democrats have been in talks about changes to key sections of the agreement with the aim of securing congressional passage this year” (Bloomberg).
Last Thursday, Pelosi said that the USMCA would only be brought up for a vote “when it includes strong enforcement provisions”.
Mexico has resisted Democratic demands for teams of U.S. factory inspectors in Mexico, as well as a proposal to ban imports from factories found to be in violation of labor rights provisions. Seade insisted that Mexico can “accept fast-tracked arbitration panels to hear labor rights complaints”.
Recap of FINNOSUMMIT Miami by LendIt Fintech
On December 3 and 4th, over 700 attendees congregated in Miami to gain insights and discuss why Latin America is the hottest region in the world right now for fintech innovation.
The event kicked off with keynote speaker Sergio Furio, the CEO and founder of Creditas, the leading Brazilian consumer lender that received $231 million in equity funding from Softbank earlier this year.
As reported by Lenda Academy, Furio explained that Creditas decided to focus on secured lending because it is hard to automate and he saw an opportunity to create a differentiated company. He added that the company has major ambitions as they expand into Mexico and introduce new lending products; and are even looking beyond finance to offer ancillary products.
“The bank of the future is not going to be the bank of the past with a digital interface, it will look very different,” Furio said.
Ariza emphasized that although there are more entrepreneurs in Latin America than any other region, many struggle with access to capital.
“The existing IPO process in Mexico is costly and slow, with the average cost of 3.5% of the money raised. BIVA already has a 16% market share in Mexico as they have built a trading system powered by Nasdaq. There are only 270,000 individual brokerage accounts in a country of 130 million and Maria is out to change that” (Lenda Academy).
As Softbank’s Latin American tech fund continues to make headlines, many were curious to gain insights on the fund.
Softbank has committed $2.5 billion of their $5 billion LatAm tech fund, and have therefore already picked through the “obvious investments” in the region, so deploying the rest of their capital will take more time.
According to Passoni, Softbank’s thesis is to “invest in later stage companies with positive unit economics where their investment will likely be the last money the companies need” (Lenda Academy).
Unlike many other Softbank investments elsewhere in the world, the group is looking to join other investors in Latin America, as they feel they can learn a lot from other funds.
dataPlor’s Geoff Michener and Yan Carlomagno attended the event, and connected with attendees to discuss how hand collected local business data helps financial services companies with fraud detection, data verification, and lead generation.
“At FINNOSUMMIT Miami, we gained valuable insights into the region’s rapidly growing fintech sector. Keynote speeches given by successful fintech entrepreneurs and LatAm-focused investors confirmed the vast potential of these Latin American markets” Michener said.
WalkMe Raises $90M For Digital Adoption Platform, Eyes Latin American Market
San Francisco-based WalkMe™, which operates a digital adoption platform for enterprises, announced it has closed a $90 million round of funding.
London-based Vitruvian Partners led the round, joined by previous backer Insight Partners. This latest round of funding brings WalkMe’s total raised to more than $307 million since it was founded in 2011. The company raised $50 million across two tranches of a Series F in 2018, and reached unicorn status last year, with the first tranche.
WalkMe’s goal with its “context-intelligent” DAP, in its own words, is to make it “effortless to use any software, website or app… so users can complete tasks faster and easier” (Crunchbase News).
The company noted that it has almost doubled its valuation in the last year, which values the company at roughly $2 billion. The startup said it surpassed $100 million in annual recurring revenue (ARR) in the second quarter. Meanwhile, in the third quarter, its new business bookings grew 100 percent year-over-year.
As reported by Crunchbase News, the company plans to use the new capital to scale and “drive expansion into new markets,” including Latin America. Currently, the startup has over 2,000 customers, including more than 30% of Fortune 500 companies.
Jeff Bezos-Baked Chilean Foodtech NotCo Expands Products in Brazil
As reported by Contxto, the Chilean food- tech / bio-tech announced plans to debut its dairy-free milk on Brazilian shelves before the new year. Products will include NotMayo, Not Ice Cream, Not Milk, and more.
“According to reports, the company - endorsed by Jeff Bezos - is tailoring recipes to Brazilians’ undeniable sweet tooth.”
NotCo has developed its own proprietary AI algorithm to optimize recipe creation called Giuseppe. With this technology, the company can effectively identify alternatives to animal products by honing in on foods’ molecular structures via machine learning, allowing NotCo to come up with the most “believable” products in terms of tastes and textures (Contxto).
NotCo was originally founded in 2015 by Matias Muchnick, Karim Pichara, and Pablo Zamorawith an investment of $250,000 USD.
“A few years later, Kaszek Ventures lead a financial round worth US$3 million, followed by a massive US$30 million investment. During this time, the founder of Amazon Jeff Bezos became one of the startup’s most high-profile investors.”
Outside of Chile, NotCo’s products are sold in Argentina, Brazil, and the United States.
Video: How Nubank is Changing the Way Brazilians Bank
David Velez founded Nubank to offer financial services to Brazilians who had never had a bank account before. Now, his company is one of the most valuable startups in all of Latin America.
Shocked by the difficulty of opening an account with a traditional bank, David Vélez created Nubank: a financial institution that would offer no-fee accounts and credit cards, and welcome the largely unbanked Brazilian population to their first-ever bank accounts after they answered a few easy questions through an app.
“When I started talking to the experts in the industry everybody told me, ‘David, you’re a foreigner. You don’t understand Brazil — these are the most powerful companies in Brazil that you’re going after.” They said, "nobody competes with the five banks that own the market. They’re going to crush you. It is impossible to compete, ” Vélez, who is originally from Colombia, told CNN Business.
Vélez knew that the unbanked were a potentially risky customer base. Additionally, as a foreigner, he’d need to secure a presidential decree to get a permit to start Nubank in Brazil: a process that could—and did — take years.
Above all, he knew Brazil’s banking oligarchy was powerful. According to the Wall Street Journal, in Brazil, five banks control almost all of the market and charge high fees — with annual interest rates on credit cards recently averaging nearly 300% on unpaid balances.
CNN Business reports that,
“In Brazil, which is Latin America’s largest economy, the banking industry has historically been highly concentrated: Last year, the five largest banks controlled 81% of the country’s total financial system assets and 85% of all loans. With precious little consumer choice, the banks have been able to set the parameters most favorable to them: high fees and rates, confusing loan terms and sometimes blasé service. After all, customers didn’t really have anywhere else to go.”
In 2014, the company launched its first product in Brazil: a no-fee, low-interest international Mastercard credit card completely managed by a mobile app.
In 2018, Nubank launched a digital savings account called NuConta, after the company finally received its special banking permit from the Brazilian government. Earlier this year, the company debuted a personal loan product.
As the cost of technology started to come down and there was better access to Wi-Fi, venture capital was also starting to pour into Latin America, while consumer demand put pressure on the region’s governments to encourage a more competitive banking market.
Lindsay Davis, a senior intelligence analyst at CB Insights who focuses on the fintech industry, stated,
“In emerging markets like Brazil, for years monopoly banks hadn’t had to stay competitive… They were able to charge their fees and serve only part of the population and do just fine that way.”
For Nubank, the digital focus helps keep costs low. Vélez explained that because the company doesn’t have the overhead of banking branches, Nubank able to cut out certain fees. Instead, revenue comes from interest and from interchange, the fees merchants pay to Nubank for the processing of card payments to make a purchase.
According to CNN Business, Nubank is focused primarily on Latin America, where the company estimates it has saved customers $1 billion in fees alone so far. Today, Nubank has 50% share of all new credit cards issued in Brazil.
The company is not yet profitable, although it is narrowing losses: from $117 million Brazilian Reais (USD $29.4 million) in 2017, to about a $100 million Reais net loss (USD $25 million) in 2018.
Looking ahead, Nubank is focused on continuing expansion rather than making a profit.
“For the next five years we’re focused on Latin America, but over a very long-term horizon, we think emerging markets are very interesting — when you look at Nigeria, Indonesia, Vietnam, India, you find the same oligopoly structure,” Vélez said.