Kueski Secures $202M Funding, Approaching $100M ARR

Kueski Secures $202 Million Funding to Expand Financial Access in Mexico

Kueski, a leading financial technology company headquartered in Mexico City, has recently announced the successful acquisition of $202 million in combined equity and debt financing. This substantial investment will fuel the company’s expansion of “buy now, pay later” (BNPL) services and online consumer lending within the Mexican market.

Investment Details

The $102 million equity round was spearheaded by StepStone Group, following their recent acquisition of Greenspring Capital. Victory Park Capital led the $100 million debt financing component.

StepStone was joined by a consortium of new investors, including One Prime Capital and Glisco. Existing investors, such as Altos Ventures, Cathay Innovation, Richmond Global Ventures, Rise Capital, Tuesday Capital, Angel Ventures, and Cometa, also participated in this funding round.

With this latest infusion of capital, Kueski’s total funding now surpasses $300 million, encompassing both equity and debt. Altos Ventures previously led the company’s Series B funding in 2019.

Company Performance and Future Outlook

While Kueski has not disclosed its current valuation or precise revenue figures, CEO and founder Adalberto Flores anticipates the company will “soon achieve the $100 million+ ARR milestone.”

Founded in 2012, Kueski was established prior to the widespread adoption of the “buy now, pay later” model. Flores was driven by the challenges he and his family faced in accessing financial services in Mexico, and the poor user experience associated with traditional methods.

Addressing Financial Inclusion in Mexico

Flores highlighted the difficulties even successful business owners encountered in securing credit. He cited his own father, who owned a thriving business employing nearly 100 people, yet was denied access to financial resources.

He also pointed to the risks associated with physically visiting bank branches, where individuals carrying cash could become targets for robbery. This situation is particularly prevalent in Mexico, which has the fifth-highest rate of unbanked citizens globally.

Approximately two-thirds of the Mexican workforce is employed in the informal economy, receiving payments in cash that are rarely deposited into bank accounts. This creates a significant challenge for financial institutions attempting to assess creditworthiness.

Kueski’s Innovative Approach

Consequently, 80% of Mexican consumers lack access to credit cards, and 78% of merchants do not have point-of-sale (POS) terminals.

Kueski was founded with the mission of broadening access to essential financial services for the Mexican population. Instead of relying on traditional credit bureau data, the company leverages contextual information, including device details, real-time behavioral patterns, and sociodemographic data.

This data is analyzed using sophisticated artificial intelligence and machine learning technology to accurately predict an applicant’s ability to repay a loan.

“The extensive dataset we’ve accumulated from over six million unique applicants provides Kueski with a powerful data network effect, enabling us to more accurately assess repayment capabilities,” Flores explained.

Product Portfolio and Growth

Kueski offers a suite of three financial products: Kueski Pay (BNPL), Kueski Cash (personal loans), and Kueski Up (interest-free earned wage advances). All three have experienced “very strong growth” over the past year.

Specifically, Kueski Pay, launched three years ago, saw a 210x increase in Gross Merchandise Volume (GMV) from November 2020 to November 2021. The Kueski Cash product grew by 320% during the same period. Kueski Up is the company’s newest offering.

Since its inception in 2012, the company has facilitated nearly 5 million online loans.

“Our ambition is to evolve into a comprehensive financial super app tailored to the Mexican consumer,” Flores stated.

Building Credit History

A distinctive feature of Kueski’s services is its ability to help users establish a credit history by reporting both timely payments and defaults.

Impact of the COVID-19 Pandemic

Like many fintech companies, Kueski experienced increased demand as a result of the COVID-19 pandemic.

“The pandemic spurred historic growth for Kueski, allowing us to reduce friction in online purchases by eliminating the need for customers to visit convenience stores to prepay for orders,” Flores noted. “From a credit perspective, the results were exceptional. We were able to refine our AI and machine learning models on a daily basis, a frequency that traditional banks typically reserve for six-month updates.”

Future Plans

The newly acquired funding will be allocated to expanding the BNPL footprint in Mexico and developing new products for Mexican consumers. The company currently employs nearly 500 individuals, an increase from 223 in September 2020, and plans to grow its workforce to almost 1,000 by the end of 2022.

Kueski has successfully integrated thousands of merchants, including Steve Madden and Sally Beauty, into its BNPL ecosystem, a significant increase from the 49 merchants integrated at the beginning of the year.

Currently, Kueski Pay is integrated with Walmart, Mexico’s largest retailer, and offers purchases from other retailers and services such as Kipling, VivaAerobus, Nautica, and Xiaomi Shop.

In the fourth quarter, Kueski intends to launch its BNPL product in physical retail stores, providing an alternative to the traditional, high-interest financing plans offered by Mexican banks for decades.

Kueski will also soon release applications for both the Google Play Store and Apple App Store.

Benefits for Merchants

Flores emphasized that merchants appreciate Kueski Pay because it has enabled “hundreds” of companies to increase their online sales by up to 70%, reduce chargebacks, and boost average transaction values by as much as 50%.

“We anticipate exceeding one million unique users transacting through our financial products by the end of the year,” Flores said. “We believe that buy now, pay later is still in its early stages in Latin America. In Mexico, BNPL presents a substantial opportunity, given the limited access to traditional banking, the prevalence of cash transactions, and the scarcity of available payment options.”

Expansion Plans

Kueski is currently focused on the Mexican market but plans to expand its services to other countries in Latin America in the future.

StepStone Managing Partner Jim Lim expressed his firm’s enthusiasm for the opportunities within the BNPL sector in Mexico and throughout Latin America.

“We are pleased to partner with a market leader in Latin America, Kueski,” he stated.

Altos Ventures’ Anthony Lee highlighted that Kueski’s “years of technology development and consumer lending data” provide a “valuable market experience that newer entrants simply cannot replicate.”

“This allows the company to better assess consumer risk and uniquely support merchants in ways its competitors cannot match,” he added.

Competitive Landscape

Kueski is not alone in the Mexican BNPL market. Nelo, a startup founded by former Uber international growth team leaders, began offering buy now, pay later services in Mexico earlier this year, with plans to expand throughout Latin America. The company recently raised $20 million to support its growth initiatives.