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Startup Contributor

Building a Fintech From Scratch

By Gustavo Rojo | Tue, 03/02/2021 - 09:33

Next April will mark three years since we issued our first credit card to our first customer. It’s been a tough journey with lot of valuable, tear-dropping lessons. Launching a startup leads you through intense ups and downs so your emotions can change twice or even three times in the same day, and you find yourself asking, why did I start this? A bit later, your question becomes, why didn’t I start this before? It is exciting!

The Passion

I have always had the motivation to make my country a better place and a way to do that is to improve economic conditions by building an amazing new business. It has been proven that building powerful tech startups makes a country stronger. We can see that with the Big 4 tech startups in the US that are worth more than $5 trillion.

After working for more than 10 years in the financial industry in Europe, Mexico and Latam, I had a clear vison of the millions of people who had been shunned from the formal financial system due to inefficiencies. I had the clear idea of the model that could overcome those inefficiencies.

Finally, I started hearing the term “fintech” and saw different examples in Mexico and other countries. Bingo! Now, I had the opportunity to solve a problem for a massive market by following my passion of starting a new company where my experience would be a strong competitive advantage.

Innovate to Break Paradigms

I did not start the company completely from scratch. The truth is that I had already been confirming the product-market-fit during my years in the bank. So, my first challenge was to figure out how to launch a credit card without the infrastructure and resources of a bank. The two main tasks were to find a partner to issue the credit card and the legal vehicle allowed to issue a credit card in Mexico.

The first was tough because I was a lonely dreamer asking the big guys to partner with me to issue a credit card. I was not successful. However, in Mexico, a company called Carnet is a brand that is accepted at every single point of sale in the country. It was perfect! I met with Carnet and they agreed to provide me the license to issue credit cards.

Finding the right legal vehicle to issue a credit card was a bit more complicated. It could have been as easy as asking a lawyer for help. The problem was that lawyers from the financial services did not have this specific knowledge. All of them agreed that in order to issue a credit card, I needed to get a banking license. So, I decided to take a deep dive into the law myself to know if they were correct or not.

What I discovered was that a banking license was not needed to launch a credit card. This finding allowed me to continue with the project.

There are at least three key takeaways here: Fist, the regular experts might not be experts in what you are trying to build so it is important that you be willing to deep dive into areas where you have no experience.

The second is that innovation does not only come from the tech side; in this case, it came from the legal side.

The third is that when you innovate, you are able to add value to your customers by providing them a new offering. The downside is that it could help competitors from other countries to land in your market but that is part of the game.

Tech and Data-Driven Startup

Once it was clear what was needed to launch a credit card from scratch, I needed to find the core for Vexi: my co-founders. I was lucky to find partners who I trust, with strong experience and who had a spark in their eyes when I shared with them the impact that we could make: to serve tens of millions of people shunned from the formal financial system, providing them with access to a credit card in a country where the credit card is the main path to creating a credit history.

From day one, we understood that one of our strategic advantages would be our digital-first banking approach. We invested in defining a scalable architecture and developing all the systems needed to operate, having always in mind all the lessons learned in 10 years managing credit cards. We knew that the core system needed to be modular and able to provide key features that could turn into differentiators. This trait had positioned us as leaders in these features (such as our secure virtual credit card and fixed installments from the app) that three years later, our new competitors are launching or developing.

Our tech expertise has helped us to gain the trust of world-class corporations like American Express. With a new product launched under their license, we have further enriched our value proposition. Now, Vexi is changing the lives of its customers not only by providing them with their first credit card but also providing a credit card in cooperation with a prestigious credit card brand and including free insurance and access to a huge number of merchants where they can partake in limited interest-free offers. These features combined with our warm service and no annual fee offer turns Vexi into the best cost-benefit option for our segment among banks and startups.

Like Capital One in the US, from the very beginning we prepared our systems to gather all possible data and meta-data from our interactions with our customers during the application, on the app, through our customer service and from all their transactions. That has helped us to successfully manage risk, achieving even lower delinquency rates than some traditional banks. Now, we are using the data to add more value for our customers.

The Sky is the Limit

Now, the challenge is even bigger. We are thrilled to have delivered 130,000 approved credit cards and we want to increase that to 500,000. We are convinced that, just like in the beginning, tech will be the key to supporting this growth and improving our customer experience. We will increase our talented team. If you are interested in joining a scalable company, join us! There is a lot of fun ahead!

If you are thinking about launching your own startup, do it. Your passion is calling you. It is true that today it’s very tough, but I am sure that it will always be tough or even tougher. One of the best ways to support our society in challenging times is to innovate by building companies that develop amazing products with impact.

Photo by:   Gustavo Rojo

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