Nelo Secures $20M Funding to Expand BNPL in Mexico

Buy Now, Pay Later Expansion in Latin America

The buy now, pay later (BNPL) sector has garnered significant attention this year, evidenced by acquisitions like Square’s pursuit of Afterpay and Affirm’s initial public offering.

However, Latin America represents a largely untapped market within this rapidly expanding landscape.

Nelo's Entry into the Mexican Market

Nelo, a startup established by former Uber international growth leaders, initiated buy now, pay later services in Mexico earlier this year. Their overarching ambition is to extend operations throughout Latin America.

To facilitate this expansion, the company has secured $20 million in funding. Currently, Nelo collaborates with over 100 merchants, including Steve Madden and Ben & Frank.

Customers can utilize Nelo’s application to make purchases from popular platforms like Amazon, Mercado Libre, Telcel, Netflix, and Spotify.

“Our primary objective is to foster digital commerce across LatAm, with BNPL in Mexico serving as the initial phase of this vision,” stated CEO and co-founder Kyle Miller.

Series A Funding Details

The funding round was spearheaded by New York-based Two Sigma Ventures, with participation from existing investors such as Homebrew, Susa Ventures, Crossbeam, and podcast host Anthony Pompliano.

Additional investors include Gokul Rajaram, Emilie Choi, founders and employees from Wealthsimple, Orum, Alloy, Chime, and Square, alongside funds and syndicates like Primer Capital, Gaingels, and Moving Capital.

This latest Series A financing brings Nelo’s total funding to $25.6 million since its founding in 2019.

Competitive Differentiation

While Nelo isn't alone in the Mexican BNPL market – with companies like Alchemy and Addi also planning offerings – Miller emphasizes a key differentiator.

Nelo is reportedly the sole BNPL provider in the region offering both a dedicated consumer mobile app and integrated checkout options for merchants.

“Our mobile app empowers customers to utilize buy now, pay later at over 75 merchants, with plans to extend this to virtually any merchant, positioning Nelo as the go-to destination for online shoppers,” Miller explained. “This established consumer base is vital for building Nelo’s network.”

Evolution of Nelo’s Product Offering

Nelo launched its initial product in Mexico in January 2020, resembling a debit card from a neobank.

Mid-year, the company introduced credit installment loans.

In March 2021, Nelo debuted its first product through an Android app, allowing customers to use it like a credit card with merchants like Netflix and Spotify.

Many users initially leveraged the service to convert prepaid bills, such as utilities and mobile phone charges, into postpay arrangements.

Growth and Future Plans

Currently, Nelo has apps available on both Android and iOS, experiencing a 50% month-over-month growth in revenue and GMV. The platform processes over 100,000 new purchases/transactions monthly.

The new capital will be allocated to expanding both the consumer and merchant base, as well as bolstering the company’s team.

Nelo maintains hubs in Mexico City and New York City, alongside a remote workforce, currently employing 23 individuals, an increase from 12 in January.

The company’s current focus is entirely on Mexico, a market Miller describes as experiencing an “explosion” in e-commerce and being “the fastest-growing market in the world.”

“The timing is ideal for our business and product,” he stated to TechCrunch.

Investor Perspective

Frances Schwiep, Partner at Two Sigma Ventures, believes Nelo has the potential to become the leading financing solution for consumers in Latin America, beginning with BNPL.

She argues that the case for BNPL in LatAm, particularly Mexico, is even stronger than in established markets like the US, Europe, and Australia.

Schwiep highlights the “extreme” lack of credit access in Mexico, with less than 15% of the population possessing a credit card, and the long-standing tradition of installment payments (“meses sin interes”) through less accessible cash vouchers.

Market Opportunity in Mexico

Furthermore, Schwiep notes that e-commerce spending in Mexico is growing at a faster rate than credit access, coupled with a favorable regulatory environment for fintech companies.

“Mexico’s relatively young population also aligns well with the target demographic for BNPL businesses,” she added. “The accelerating adoption of banking and mobile e-commerce in LatAm has created an environment for a breakout company in this space.”

Schwiep, having lived in Mexico, has observed a rapid transformation in the digital commerce landscape.

“I believe Nelo has assembled the team, product, data advantages, and go-to-market strategy to capitalize on this significant market opportunity,” she said.

Strategic Advantages of Nelo’s Approach

Nelo’s initial focus on installment payments for essential services, like utilities and phone bills, before expanding into retail, provides the startup with distinct advantages.

“First, Nelo cultivates a direct and enduring relationship with the consumer,” Schwiep explained. “Nelo is uniquely building trust and brand loyalty with consumers in this manner.”

The frequent interactions with customers also generate a “tremendously valuable longitudinal data asset for Nelo,” according to Schwiep.

“They are accumulating valuable repayment history on their platform that incumbents like Affirm and Afterpay, and even local credit bureaus, do not have on consumers in the region,” she concluded.