Luis Ruben Chavez, founder and CEO of Zenfi, says consumer finance in Mexico and across Latin America is “fundamentally broken.”
“Achieving basic financial health in Mexico for about 50 to 60 million people is really difficult,” he told TechCrunch. “Two out of three Mexicans have a second-rate credit score and basically no tools to improve it.”
Fintech has exploded in Mexico and Latin America in recent years, driven by startups and venture capitalists, in part because founders like Chavez, whose background is in consumer finance, think there must be an easier way to help people get financing. without charging over 100% annual percentage rate on credit card and personal expenses. To put that in perspective, the average APR in the US is about 19%.
So seven years ago, Chavez started building the free super app Zenfi, a financial health platform he describes as “if Credit Karma, SoFi, Marcus and Copilot Money had a kid, it would be us.”
The platform’s main feature is what it touts as the lowest interest rate in Mexico, at an average of 19% per year. Zenfi also offers free credit monitoring and integrates with Open Banking. It also plugs into the country’s tax system so users can access tax returns and filing tools.
One of the newest features is the personal finance manager. App users answer some questions, enter their sources of financial data and receive long-term personal financial planning, Chavez said.
Seven years after Zenfi’s creation, the company has more than 3 million users, many of whom use the platform to consolidate and pay off debt from another bank, he added. It has distributed over $100 million in loans, has a default rate of 3.4% and $10 million in annual recurring revenue generated from interest rates, small credit check fees and investment product commissions.
Not only was the company able to demonstrate profitability with that business model, but it did so after raising less than $3 million previously.
Having reached profitability, Chavez said the company was able to take on a new round of financing, this time $8.5 million in new capital led through Magma Partners. Cometa, Redwood Ventures, Poligono, Conni & Co. also participated. and the AngelList syndicate led by Peter Livingston.
Chavez intends to deploy the new funds to dozens of features in the pipeline, including debit and credit products. He is also looking at three countries in Latin America where he thinks Zenfi’s business model will do well. In addition, Chavez will hire more people to add to Zenfi’s 60-person team.
“We currently have the largest financial license for lending and personal loan company in Mexico and a benchmark for the volume and quality of the portfolio,” he added. “We’re trying to make a dent in the Mexican financial system and we want to go from $100 million in loans to $2 billion, so we’re going to build internal capabilities around the team and the infrastructure.”