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Spanish (Spanish), too much!
Due to their professional status, independent contractors who partner with delivery or ride-sharing companies find it difficult to establish a credit rating. Their biggest drawback is the lack of stable income.
That’s why they often fall prey to companies that offer loans with incredibly high interest rates and invasive practices, explains José V. Fernández. He is the founder of pack ice, a new company that wants to “restore dignity to the financial lives of self-employed workers in Mexico”.
The Mexico City-based company is currently in “stealth mode” – growing organically as a beta product primarily through recommendations and a referral system among delivery people and drivers. Founded in 2020, it raised US$1.3 million in a pre-seed round led by Wollef. Other investors include Global Founders Capital, Wayra and Lightspeed Ventures.
Bankuish also has a roster of individual investors from some of the region’s most notable startups. These include the founders of Colombian delivery giant Rappi, Brazilian food ordering and delivery platform iFood, Brazilian carpooling app 99, corporate credit card Jeeves and the company of Peruvian online commerce Favo.
Fernandez, originally from Spain, worked in the financial sector in the United States before coming up with the idea for Bankuish. “As an expat in this country, I have witnessed firsthand what a lack of credit history can do for your financial security,” he told Contxto. “It’s a trap not just for expats, but for the millions of people who live outside of a formal credit system.”
Ratings as risk assessment
What concerned Fernandez most was that traditional lending institutions generally only consider one thing when making a loan: the person’s ability to manage their debts. “You could own a home and have a bank account, and all of that won’t be worth anything if for some reason you miss your monthly credit card bill,” he explained.
That’s what he’s trying to change with Bankuish. The company does not itself provide financial products. Its main clients are traditional banking players such as Santander, BBVA and Sabadell. What Bankuish then does is pre-screen customers for them from the pool of freelancers at companies like Uber, Didi, Rappi and Beat.
According to the company, there are approximately 3 million independent drivers and delivery people in Mexico alone. The authorities want to attract 500,000 of them to voluntarily join the country’s Social Security program, which benefits anyone with proof of employment.
Bankuish links its API to the platforms of these companies. They then send a push notification to all freelancers on their platforms, and they must voluntarily link their accounts to the Bankuish app. Once this is done, Bankuish is able to analyze the performance data of each worker: their number of transactions, their number of stars, the GPS location of the trips and each order or trip executed.
“We try to do a comprehensive qualitative analysis to determine the user’s future revenue,” Fernandez explained. Once they’re sifted through, they get what Fernandez calls a Bankuish score. This score is sent to major banks who are then responsible for onboarding the customer with products such as loans, insurance and other pre-approved products.
In other words, the absence of a stable income does not prevent these workers from being considered for credit. Bankuish uses his own work as a resource to do a risk assessment and ask a bank to give him a loan.
Bankuish’s CEO says privacy is a very big concern for the company. “We keep the workers anonymous and just give the banks the information they need to consider them as customers.”
Bankuish monetizes by charging banks a commission for each carefully pre-screened customer they onboard. As for companies in the gig economy, they also benefit from the relationship between banks and the self-employed. Fernandez says they have seen an increase in the number of hours worked by drivers and couriers who have acquired formal financial products through partner banks.
Financial services “as a service”
Working closely with these freelancers, Bankuish says he has identified liquidity as their main concern. This explains the size of the loans he is shortlisted for: they vary between $20,000 and 40,000 Mexican pesos (about US$985 and US$1,970). That’s a lot more than the instant loans available online, which start at 1,000 Mexican pesos (about $50).
According to Fernandez, the loans facilitated by Bankuish are the first formal loans these workers have received. “Dignity begins in financial products that provide support and power to users, not problems,” he said.
Why not connect these independent entrepreneurs with the multitude of fintech companies that provide credit cards or loans online? “The current regulatory environment in Mexico allows loans at any interest rate,” Fernandez said.
“I’ve seen terrible things, like ridiculous interest rates and really aggressive collection practices. I want to keep entrepreneurs away from these predatory practices that they are willing to accept, and instead tie them to reasonable and fair banking institutions,” he says.
Bankuish also claims to work with banks to provide entrepreneurs with the best possible terms for their loans. For example, interest rates based on what the three largest banks in Mexico offer and reimbursements that do not represent more than 40% of the average income of each user. As an added benefit, these self-employed people continue to unlock access to new financial products while continuing to pay down their debt.
So far, Bankuish has been well received. By the end of 2020, it had allowed banks to lend 82 million pesos (about $4 million). By 2021, it had quintupled: 409 million pesos, or $20 million at the end of the year. Fernandez says Bankuish will continue to grow in 2022, both in terms of expansion and capital raised.
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