Untapped Credit Market Provides Opportunity Despite RisksBy Sofía Garduño | Mon, 08/01/2022 - 10:00
Q: How has Klar’s principle of continually assuming that it is at risk shaped the company’s narrative and value proposition?
A: We try to understand risks so we can turn them into opportunities. For example, we added credit cards to our portfolio because we recognized that just offering debit cards was not enough for our customers. We continuously look for what users are craving and work to meet their biggest desires. Our goal is to satisfy their needs, while differentiating our services in the market.
Q: What risks is the Mexican population facing today and what makes Klar an ideal ally in this regard?
A: The risks have been the same for many years. The lower and working class, which is the segment we target, is always facing challenges. People want to grow and acquire better things but they feel like they are not being listened to and that financial services have left them behind. The lower and working class is not getting the products that it deserves.
In Mexico, only 20 percent of people have access to formal credit and 50 percent of adults have a bank account, so many risks are not being noticed and many voices are left unheard. For this reason, our mission has always been to democratize services and make sure that users are heard.
Q: What makes Klar Pago different from the other fintech startups expanding in the market?
A: It may seem that we are competing but we are working together to create awareness. While we might compete for users, we are jointly letting users understand that there are alternatives out there. Our main job is to create trust. Together, fintechs are fighting against archaic injustices and problems that have been around for at least 20 years.
Klar is trying to reinvent the financial services industry. We aim to empower users with simple and transparent products that enable them to live a better life. If we can offer simple solutions across the life cycle of financial services while making the life of our customers easier, then we will succeed in our mission. If we raise the bar for companies to compete with more transparency and help them to build more financial services and technological platforms, then our job is done.
Q: How has traditional banking contributed to these risks and how can they be minimized?
A: Traditional banking has contributed to the creation of the problem, otherwise there would not be a problem to solve. Klar offers financial services at a lower cost, helping us serve users that cannot be helped by other institutions and remain profitable. We are leveraging technology to address a segment of the population in ways that have never been done before. We also prioritize customer service and we are democratizing premium services regardless of how much money a user has in their account.
Q: What has traditional banking lacked to make financial inclusion a reality in the country?
A: Incentives. The Mexican banking market is lucrative, despite focusing on only a small percentage of the population. It is a highly concentrated ecosystem where a few players control a sizable majority of the market, so there is no pressure. There are no incentives to fix what the sector thinks is not broken. Traditional banking businesses are not facilitating access to financial services because users were never at the center of their business.
Q: Klar Credito grants loans without a credit bureau analysis. How have you been able to do this without it becoming a risk for the company?
A: We leverage all sources of data; we analyze an enormous amount of data to tailor the product to each specific user. By analyzing behaviors and patterns, we can determine whether users will pay back or not. Thanks to this analysis, we have effective decision-making processes.
Q: Klar has just gone through its fourth round of financing for US$90 million. How will this investment play into Klar's plans?
A: We have allied with the right capital partners and we currently have over US$175 million in equity, allowing us to have a fully funded business plan for the coming years. It allows us to execute the business plan that we had internally without worrying about money. Klar will continue to work on improving its customer service, developing more tailored products and providing access to more demographics. The company will also expand its solutions to meet the financial needs of customers. We are also going to continue to look for ways to expand, just as we are doing with the acquisition of Somos, which is a good example of how we put our money to work. We will create a more engaging brand and build trust among Mexicans.
Q: What are Klar’s expectations for the Somos acquisition?
A: This acquisition proves that we collaborate with world-class talent and that we are always seeking the most talented associates to build our culture and grow our platform. We are always interested in nurturing these types of relationships. We know Somos well and have previously worked with them on some pilot programs. With this acquisition, we will grow Klar’s ecosystem and the user will benefit from better products that will be delivered in a simple and transparent way.
The acquisition of Somos was a strategic decision that we evaluated for a long time. We believe that this acquisition will help Klar enhance its platform because it will allow us to improve our tailor-made solutions for the Mexican market. Regarding lending, the capabilities of Somos will allow us to build different products, offering smaller amounts of credit, and its machine learning models will help us to scale them faster.
Klar offers Klar Pago (debit) and Klar Crédito (credit card solutions), centralized on a digital app to provide easy access and proper resource management.