The Rise of Buy Now, Pay Later and Nelo's Entry into the Mexican Market

Buy now, pay later services, offering installment loans typically without interest, have experienced significant growth in recent years. This trend is particularly noticeable in regions like the United States, Europe, and Australia.

However, despite the presence of major players such as Affirm, Klarna, and Afterpay, Latin America has remained largely untapped. Nelo, a startup established by former Uber international growth team leaders, is aiming to change this by focusing on the Mexican market.

Securing Seed Funding for Expansion

Nelo has successfully secured $3 million in a recent seed funding round led by Homebrew, a San Francisco-based venture capital firm specializing in fintech. Additional participation came from Susa Ventures, Crossbeam, Rogue Capital, Unpopular Ventures, and other investors.

This latest investment brings Nelo’s total funding to $5.6 million since its founding in 2019. The capital will be used to further develop its platform and expand its reach within Mexico.

Competitive Landscape and Nelo’s Advantage

While Nelo isn't the sole contender in the Mexican buy now, pay later space, with companies like Alchemy and Addi also planning similar offerings, CEO Kyle Miller believes Nelo possesses a key advantage.

“Our established relationships with approximately 45 merchants are a significant differentiator,” Miller explained to TechCrunch. “Successfully increasing conversion rates for large, global merchants provides a strong defense against competition. Securing merchant partnerships is crucial, as businesses often limit themselves to a single payment option at checkout.”

Leveraging International Growth Expertise

The founders, Kyle Miller and Stephen Hebson, bring valuable experience from their time on Uber’s international growth team. They previously focused on expanding financial services in diverse markets including India, Mexico, China, and Brazil.

“This experience allowed us to observe which countries were rapidly adopting new financial technologies and which were lagging behind,” Miller stated. “For instance, China led the way in mobile payments, while India underwent a complete transformation in digital finance.”

Identifying an Opportunity in Cash-Dominant Markets

Their observations revealed a persistent reliance on cash payments in markets like Mexico. This presented a clear opportunity for Nelo to innovate and provide a more convenient payment solution.

Nelo initially launched a debit card-like product in Mexico in January 2020, followed by the introduction of credit installment loans mid-year.

Rapid Adoption of Installment Loans

“It quickly became apparent that the installment loan feature would be our most popular offering,” Miller noted. “By the end of the year, it constituted the majority of our business and was enthusiastically recommended by our users. We were effectively addressing a genuine need.”

Cash remains the predominant payment method in Mexico, accounting for an estimated 86% of all transactions. However, the region experienced a remarkable 37% year-over-year growth in e-commerce in 2020, according to eMarketer.

“Access to credit is often taken for granted in the U.S.,” Miller said. “Recognizing the potential, we decided to concentrate solely on credit solutions.”

Product Launch and Growth Metrics

In March, Nelo launched its initial product through an Android application, with a web app release planned for the near future.

Customers can utilize the service similarly to a credit card, directly integrating with merchants like Netflix and Spotify. Many are transitioning recurring expenses, such as utility and mobile phone bills, from prepaid to postpay arrangements.

To date, the company has disbursed approximately $2 million in loans and is experiencing a monthly growth rate of around 20%.

“We are witnessing substantial demand for this new product, reflected in strong organic sign-up rates,” Miller commented. “This mirrors the success of buy now, pay later models in markets like the U.S., Europe, and Australia.”

Familiarity with Installment Payments in Latin America

The concept of installment payments is already well-established in Latin America, particularly in Brazil, making it readily accepted by consumers in the region.

“We anticipate increasing competition in this market, and are actively recruiting data scientists and engineers to continuously enhance our product and facilitate growth,” Miller added.

Team and Investor Confidence

Nelo currently employs around 14 individuals, with its engineering team based in New York.

Satya Patel, a Partner at Homebrew, expressed his enthusiasm for Nelo, highlighting its ability to “solve a critical problem related to the limited access to credit for Mexican consumers.”

“Credit card penetration is below 10% in Mexico, and alternative forms of credit are largely unavailable,” Patel explained via email. “Nelo empowers Mexicans to easily and affordably increase their purchasing power at the point of sale. Importantly, Nelo delivers this solution both online, supporting the growth of e-commerce, and offline, where consumers frequently shop.”

Patel also noted the lack of reliable consumer credit rating data in Mexico, emphasizing the value of Nelo’s proprietary underwriting models and rapid merchant network expansion.

“This buy now, pay later opportunity remains largely untapped in Mexico, but requires a unique approach compared to other markets,” he stated. “The Nelo team possesses a deep understanding of the market’s nuances and is executing with exceptional speed.”