The Mexican fintech who decided to buy a bank

In the six years since the launch of Credijusto, a Mexican fintech lending to small businesses, David Poritz and Allan Apoj have generated over 250% annual revenue growth and have successfully turned Covid-19 into an opportunity.

But when the Co-CEOs decided to go mainstream by buying a bank, even one of their biggest backers backed off.

Hernán Kazah, co-founder of Latin America’s largest venture capital firm Kaszek, feared the purchase of Banco Finterra could cause the duo to lose focus. Or as he puts it, “When David and Allan said they were buying a bank, I thought they were crazy.

Poritz, a 32-year-old American anthropologist turned entrepreneur with a master’s degree in public policy from the University of Oxford, smiles ironically: “Fintechs were created to disrupt the banking industry,” he says. And yet, in June, Credijusto spent an undisclosed sum of less than $ 50 million to become a bank itself.

For them, it proved their core belief that after successfully challenging the heavy financial institution from the outside, they can now change it from the inside.

Like Credijusto, Finterra targets the nearly 5 million small and medium-sized businesses that account for half of Mexico’s gross domestic product and employ 70 percent of workers, but struggle to access credit. But Credijusto’s unique selling point is the way it processes electronic invoices, taxes, and other data to get loans to customers within hours.

Kazah worried that the price was too high “and that there might be some surprises under the rug”, but Poritz and Apoj stuck to their guns. They had started to assess whether they should apply for a banking charter to take their business to the next level.

It can take years, however. When Finterra went on sale in 2019, “we chose to buy rather than build a bank from scratch – it’s faster and we saw a lot of alignment,” says Apoj, 31, a Mexican economics graduate who cut his teeth as an entrepreneur. for a year out of college.

The objective is now “to have the speed and flexibility of a fintech service with the costs that a bank is able to provide,” adds Apoj. Right now their lowest interest rate is 7.5% and with Finterra “we can now be financially competitive with any big bank”.

In addition, with combined assets of $ 300 million “this [acquisition] double our size. . . This positions us for a lot of growth, ”he says.

Mexico has 51 banks but only a handful grant most of the country’s loans. Even successful entrepreneurs like Poritz and Apoj, who have increased Credijusto’s revenue by over 250% every year since the company was founded in 2015 to 2019, have been turned down for personal credit cards – which Apoj said was “symptomatic of a financial system where it is so difficult to access services.”

Market concentration has left a financing gap for SMEs of more than $ 160 billion, according to the World Bank, the International Finance Corporation and the SME Finance Forum.

“The SME segment has really been left behind,” says Poritz. “We want to build the first truly digital banking solution for SMEs. ”

Credijusto has already issued between $ 500 million and $ 600 million in loans and aims to double the combined customer base of the two companies to 12,000 by the end of the year, with a particular focus on the agricultural sector, which is underserved by banks. .

Less than a fortnight after the purchase of Finterra, the combined entity whose name has not yet been named launched a credit card in partnership with American Express offering buy-it-now and pay-later-till services. to five months and built-in digital financial planning tools to complete transactions. for smaller, more agile and less expensive businesses.

The couple, who met at Brown University in the United States in 2008 – in the first week of Apoj – aren’t shy about taking risks. Amid the Covid-19 pandemic, they launched a mortgage-backed revolving line of credit that has proven to be a lifeline for restaurants. President Andrés Manuel López Obrador has offered small business loans of just over $ 1,000, but little other help in the event of a pandemic.

Credijusto has also entered into an agreement with Uber Eats to become the exclusive financial partner of the delivery service in Latin America, allowing businesses on the Uber Eats platform to have access to fast loans.

“Covid has helped prove our business model in very unexpected ways,” says Poritz. “We were able to navigate Covid very well and validate our business in a much shorter time. Indeed, even during the pandemic, revenues increased by an “incredibly respectable” 30% and Apoj says the delinquent loans were “not as bad as they could have been”.

This has been music to the ears of venture capitalists and leading funds – including Goldman Sachs, Credit Suisse, Point72 Ventures, New Residential Investment Corp, QED Investors and John Mack, as well as Kaszek – who have invested some $ 400 million. in debt and equity.

“Capital alone doesn’t make a business successful, but institutional capital in Mexico is a major differentiator that has allowed us to grow,” says Poritz.

Mexico has long lagged behind other Latin American countries in terms of “unicorns” – start-ups worth more than $ 1 billion. But since October of last year, he’s racked up three, and Credijusto has set a goal of joining them – something the duo see as validation of their success in building what Poritz calls a “business.” growth, high impact that really solves a major problem. ”

Apoj, who is in charge of technology and internal operations, while Poritz manages investor relations and finance, already sees international expansion on the horizon, with small business loans higher up in the business chains. integrated supply from North America to the United States and Canada, as a major engine of growth.

Being friends and business partners was a plus. “When you’re in the trenches of a start-up, you have to do it with someone you love to be with,” says Poritz. “But to say that we still agree is not the case.”

A disagreement, in fact, delayed the business for over a year, he says. “I made a little tactical mistake. Allan wanted to build a multi-product business from the start. I was of the opinion that we should focus on a small number of products, ”explains Poritz. “I was too conservative.”

Apoj, in turn, regrets “not having pulled the trigger sooner” on some unsuitable hires, which he said ended up taking two years away from the company’s technical development. But the pair were in their mid-twenties and inexperienced, and “we weren’t confident about making these decisions at the start.”

As a result, the couple has evolved into what they call “hyper-communicators”. “We’re really very open with the staff,” says Poritz.

The two men went into other businesses before Credijusto. Poritz founded Equitable Origin, a non-profit organization focused on indigenous rights, and is still its president. At Brown, Apoj took a year to design a healthier landfill solution for a tender in Ecuador. He eventually lost, but remembers it as a “great experience”.

Now the quest is to become “the neobank for SMEs, ”says Poritz.

Or as Apoj says: “There are still tons to build. ”

[email protected]