Luis Rubén Chávez, founder and CEO of Zenfisays consumer finance in Mexico and all over Latin America is “basically broke.”
“Achieving basic financial 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 and actually have no means to improve.”
Financial technology has exploded in Mexico and Latin America in recent years, driven by startups and venture capitalists, in part because founders like Chávez, whose background is in consumer finance, think there must be an easier way to get people into financing without more then charge an annual percentage of 100% for credit card and personal charges. To put that in perspective, an average APR in the US is about 19%.
So Chávez started building the free super app Zenfi seven years ago, a financial health platform he describes as “if Credit Karma, SoFi, Marcus and Copilot Money had a kid, it would be us.”
A key feature of the platform is what it touts as the lowest interest rate in Mexico, an average of 19% APR. Zenfi also offers free credit registration and integrates with open banking. It also plugs into the country’s tax system, giving users access to 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 personalized long-term financial planning, Chávez said.
Seven years after Zenfi was founded, the company has more than 3 million users, many of whom use the platform to consolidate and pay off their debts from another bank, he added. It has made more than $100 million in loans, has a 3.4% default rate, and generated $10 million in annual recurring revenue from interest rates, petty fees associated with credit score checks, and commissions from its investment products.
Not only has the company been able to demonstrate profitability with that business model, but it has achieved it by previously raising less than $3 million.
Now that Chávez has turned profitable, he said the company is in a position to enter another round of funding, this time $8.5 million in new capital led through Magma Partners. Cometa, Redwood Ventures, Poligono, Conny & Co. and an AngelList syndicate led by Peter Livingston also participated.
Chávez plans to use the new money for dozens of features in the pipeline, including debit and credit products. He also looks at three countries in Latin America where he thinks Zenfi’s business model will thrive. In addition, Chávez will hire more people to strengthen Zenfi’s 60-person team.
“Currently, we have the largest fintech and personal loan licenses in Mexico and a measure of volume and portfolio quality,” he added. “We are trying to put a dent in the Mexican financial system and want to go from $100 million in loans to $2 billion, so we will build the internal capabilities around the team and infrastructure.”