Credit Card Access in Mexico: A Growing Fintech Opportunity

Credit cards are widely accepted in the United States, however, their adoption rate is considerably lower in numerous other nations, especially within Latin America.

Cash Dominance and E-commerce Growth in Mexico

In Mexico specifically, cash transactions continue to be the prevalent payment method, accounting for approximately 86% of all payments made.

Despite this, card usage is experiencing growth, driven by the increasing popularity of online shopping. Mexico was recently identified as the fastest-growing e-commerce market globally, according to a recent study.

However, financial inclusion remains a challenge, with only 37% of Mexican citizens aged 15 and over possessing a bank account, as indicated by recent data from the World Bank.

Stori: Addressing the Credit Gap

These conditions present a significant opportunity for fintech innovation.

The founders of Stori, a Mexico City-based startup, recognized this potential and established their company to address it.

Company Launch and Early Traction

Stori initiated its credit card service in Mexico in January 2020, and has since received applications from over 1 million prospective customers.

The founding team possesses extensive experience in financial services, with several members having previously worked at institutions like Capital One, Mastercard, Morgan Stanley, GE Money, HSBC, and Intel, both in Mexico and the United States.

Series B Funding and Expansion Plans

The company has secured $32.5 million in Series B funding, with the objective of becoming the leading credit card provider for Mexico’s expanding middle class.

Lightspeed Venture Partners spearheaded the financing round, bringing Stori’s total funding to $50 million since its founding in early 2018. Lightspeed Partner Mercedes Bent stated that this investment represents the firm’s largest commitment to date in the Latin American region.

Vision Plus Capital, BAI Capital, and Source Code Capital, existing investors, also participated in this funding round.

A Mobile-First Approach

Stori offers credit cards through a completely mobile app-based platform, targeting the growing middle-income demographic in Mexico.

The initial two years were dedicated to developing the startup’s underlying infrastructure and technological platform.

Rapid Growth and Market Focus

In January 2021, the fintech experienced a 14-fold increase in monthly new customer acquisition compared to January 2020, and a six-fold increase over its 2020 monthly average, according to co-founder Bin Chen.

Currently, Stori is concentrating solely on the Mexican market, given its substantial size – a population of nearly 130 million.

Impact of the COVID-19 Pandemic

The COVID-19 pandemic accelerated demand for digital payment solutions, benefiting Stori’s growth trajectory.

Bin Chen explained that Mexican consumers are increasingly utilizing e-commerce and app-based services, and credit cards are the preferred payment method within these channels.

Furthermore, individuals are seeking flexible credit options to manage fluctuating cash flow and unexpected expenses.

The pandemic also prompted a shift towards digital financial services as people sought to avoid in-person visits to bank branches.

Founders’ Personal Connection

A common thread among Stori’s co-founders is their shared experience of facing exclusion from traditional financial services.

Bin Chen recalled his own struggles as an international student, relying on a teaching assistantship and frequently facing financial hardship before obtaining his first credit card.

Mission Alignment with TomoCredit

Similar to TomoCredit’s efforts in the U.S., Stori aims to provide access to credit for middle and low-income individuals who are new to the formal financial system.

Future Investments and Team Expansion

The newly acquired capital will be allocated to expanding the customer base, increasing headcount, and investing in product development, technology infrastructure, and underwriting processes.

Stori’s team has grown from 40 to 80 employees, with offices in Mexico, the U.S., and China.

The company’s long-term vision is to evolve into a leading digital bank for underserved populations in the region.

Investor Confidence

Lightspeed Venture Partners initially engaged with the company’s founders over a year ago.

Mercedes Bent highlighted the team’s depth of experience and their ability to navigate the challenges of the pandemic, demonstrating the strength and improvement of their underwriting models.

Global Fintech Thesis

Yiran Liu, a partner at Vision Plus Capital, stated that the firm led Stori’s Series A round and continues to actively invest in the company.

Vision Plus Capital is focused on digital fintech models globally, particularly in emerging markets, and is impressed by Stori’s execution and the significant market opportunity in Mexico.