“Buy now, pay later” services have develop into so ubiquitous that BNPL may as well just be one other way of saying “debt.” But in Mexico, where the BNPL platform Applause works, big poorly banked population makes BNPL more like an alternative to money.
The four-year-old Mexican fintech startup makes it easier to make partial payments for offline and online sellers, even if the buyer doesn’t have a bank card.
For end users, Aplazo offers a virtual card that enables them to buy now and pay later at multiple stores. The recent $45 million Series B round led by QED Investors should help it proceed to expand its reach, each virtually and physically.
While BNPL is often associated with online retailers, e-commerce in Mexico is still limited, and Aplazo says greater than half of its business is made up of in-store transactions. Offering this selection is a way for stores to increase sales and loyalty, and it seems to be working: the company reports that its revenue tripled last 12 months.
Mike Packer, partner responsible for Latin America at QED, highlighted Aplazo’s progress to date in an interview with TechCrunch. “The network and the product they have built have a huge competitive advantage. They have managed to do a lot of transactions, a significant amount of data, relationships with almost 10,000 sellers… It all adds up over time.”
The company was also able to use data and technology to reduce credit losses despite its growth, Aplazo CEO Angel Peña told TechCrunch. “The entire organization has artificial intelligence built into your DNA, and that’s what it is [brought] amazing performance last year. For context, we have cut our crime rates in half [during] in the same period, we achieved a more than 3-fold increase in turnover. This was certainly made possible by our ability to use AI to underwrite every transaction.”
Unlike in the US, Aplazo cannot at all times rely on credit history; according to the company, 40% of users have none. This makes it difficult for international BNPL players to enter Mexico, even if they have a strong market presence in other countries, as Affirm or Klarna do.
However, Aplazo has competitors in Mexico, such as fellow BNPL provider Kueski, which recently cooperated with Amazon. Others, such as Colombian account-to-account payments startup Fintocthey take a different approach but have the same goal of reducing transaction fees and friction for sellers.
For Aplazo, BNPL sounds more like a means to an end, a stepping stone to larger fintech ambitions.
“Our vision is to become the preferred payment method in Mexico; and because of our position in a market where we serve underserved users and work with underserved sellers, we see many opportunities to expand relationships with both sellers and consumers to create greater value for them,” Peña said.
However, the company is expanding cautiously and says it has reached money flow breakeven in the past few months, with a regular workforce of 130 people. “We are very conscious of the company’s performance,” Peña said.
This is also in line with what VCs want at once, and likely explains why Aplazo managed to raise a large round and boost its valuation despite the current context.
Brazilian VC Andre Maciel, whose company Volpe Capital participated in the round as a recent investor, said in a statement that “Aplazo’s growth profile and unit economics not only set the company apart from all other competitors we have seen in the region, but also provide comfort for the company the possibility of self-financing growth in the future.”
Existing investors Oak HC/FT, Kaszek and Picus Capital also participated in the round, which is in addition to the bridge financing the company has raised since its $27 million Series A launch in 2021. In total, the company has secured $100 million in equity capital USD and USD 75 million in incurred debt.