Buy now, pay later (BNPL) has been making headlines all over the place this year — from Square’s planned acquisition of Afterpay to Affirm going public.
Still, Latin America remains an under-penetrated market in the increasingly crowded space.
Nelo, a startup founded by former Uber international growth team leads, began offering buy now, pay later services to Mexico earlier this year. Its ultimate goal is to expand to all of Latin America. And it has just raised $20 million in an effort to help it advance on that goal. The Mexico City-based company already is live with over 100 merchants, including Steve Madden and Ben & Frank. Using Nelo’s app, customers can make purchases from merchants such as Amazon, Mercado Libre, Telcel, Netflix and Spotify.
“Our goal is to enable digital commerce throughout LatAm, and BNPL in Mexico is our first step towards that vision,” said CEO and co-founder Kyle Miller.
New York-based Two Sigma Ventures led the round, with existing backers such as Homebrew, Susa Ventures, Crossbeam and angel investor and popular podcast host Anthony Pompliano also participating. New investors include angels like Gokul Rajaram and Emilie Choi, founders and employees from Wealthsimple, Orum, Alloy, Chime, Square and funds/syndicates in addition to Primer Capital, Gaingels and Moving Capital. With the latest Series A financing, Nelo has raised a total of $25.6 million since its 2019 inception.
To be clear, Nelo is not the only player in the Mexican market. A number of others, including Alchemy and Addi, have also outlined plans for buy now, pay later offerings in the region. But what differentiates Nelo from its competitors, according to Miller, is that it claims to be the only BNPL company in the region that has a consumer mobile app in addition to an embedded checkout experience for merchants.
“Our mobile app allows customers to buy now and pay later at over 75 merchants, and very soon, any merchant,” Miller said, “ultimately becoming the destination for any consumer that wants to buy online. This captive consumer base is crucial to building the network that is Nelo.”
Nelo issued its first product in Mexico in January 2020, similar to a debit card offering from a neobank. In the middle of the year, the company launched credit installment loans.
Then in March of 2021, Nelo launched its first product via an Android app. Customers can use its offering like a credit card, connecting directly with merchants such as Netflix and Spotify. Many users started out by paying for things like utility bills and cell phone bills, turning them from prepaid to postpay.
Today, the startup has apps on both Android and iOS and its revenue and GMV is growing by 50% month over month, according to Miller. It is currently seeing over 100,000 new purchases/transactions per month.
Nelo is planning to use its new capital to grow its consumer and merchant base, and to continue to build out its team. The company has hubs in Mexico City, New York City and remote employees. It currently has 23 employees, up from 12 in January.
For now, Nelo is focused 100% on Mexico, where Miller notes, e-commerce is “exploding” and is home to “the fastest growing market in the world.”
“This has greatly impacted our business,” he told TechCrunch. “Right now is the perfect time for this business and product.”
Two Sigma Ventures Partner Frances Schwiep believes that Nelo has the potential to emerge as the leading financing option for consumers in LatAm, starting with BNPL.
In her view, the case for BNPL in LatAm, and particularly Mexico, is even stronger than for BNPL in the many regions where it has already exploded in popularity such as the United States, Europe and Australia. She points out that in Mexico, there is an “extreme” lack of access to credit with less than 15% of the population in Mexico having a credit card. Also, there is existing behavior around paying in installments in Mexico that has been around for several decades, called “meses sin interes,” but via “difficult-to-access” cash vouchers.
Meanwhile, e-commerce spend in Mexico is increasing much faster than access to credit, Schwiep noted, in addition to open fintech regulation in the country making it all easier.
“The relatively young population in Mexico is also more aligned with the target demographic for BNPL businesses,” she said. “On top of this, the accelerating adoption of banking and mobile e-commerce in LatAm has created an environment for a breakout company in the space today.”
On a personal level, having lived in Mexico over the past year (and previously having lived in LatAm in 2011), Schwiep told me that it has been “wild” to witness the market for digital commerce essentially transforming overnight.
“I believe Nelo has built the team, product, data moat and go to market playbook that is best positioned to capitalize on this incredible market opportunity,” she said.
The fact that Nelo started by offering installment payments for everyday essentials, such as utility and phone bills, before evolving into retail, gives the startup some advantages, Schwiep added.
“First, Nelo owns a direct and deep, recurring relationship with the consumer,” she said. “Nelo is the only BNPL company in the region building the trust and brand loyalty with the consumer in this way.”
Plus, the multiple touch points per month with consumers translates into a “tremendously valuable longitudinal data asset for Nelo,” according to Schwiep.
“They are amassing valuable repayment history on their platform that incumbents like Affirm and Afterpay and even local credit bureaus do not have on consumers in the region,” she said.