Klar raises $15 million to expand access to debit, credit in Mexico

Mexican payments startup Klar has raised $15 million in a Series A round in an effort to challenge traditional banks by expanding access to debit cards and credit lines.

The $15 million Series A round was led by Prosus Ventures (formerly Naspers Ventures) with participation from a new investor, International Finance Corporation, as well as returning investors Quona Capital and Mouro Capital (formerly Santander Innoventures).

Klar’s current round brings the total debt and equity funds raised to approximately $72 million since the company was founded in 2019. The funds will be used to grow Klar’s engineering capabilities in both its Berlin and Mexico City hubs in order to expand the company’s suite of products.

“Klar is making credit accessible to all Mexicans, including those with no credit history,” Daniel Autrique, a Klar co-founder and its chief financial officer, said in a press release. “We help people build credit by looking at how and where they spend their money, instead of being stuck with traditional credit scores that are backward looking and obsolete.”

Taking a page out of fellow U.S. startup Petal’s playbook, Klar is seeking to go beyond leveraging traditional credit bureaus to underwrite credit. Petal uses AI to access banking histories of U.S. consumers, particularly millennials and Gen Z, in order to underwrite them as many of those consumers don’t have credit histories. Most recently Petal has expanded its target market to now include consumers with blemished credit histories.

In a country where only 44% of adult consumers have a bank account, according to the World Bank, leveraging banking histories can be a challenge. Klar’s approach has been to start with providing a bank account coupled with a debit Mastercard and then examine the usage of that account to make a credit underwriting decision.

Since Klar’s inception it has signed up 200,000 customers to its bank account. Klar incentivizes its bank account holders to build a usage history by providing a 1% to 4% cash-back reward on debit card purchases, based on merchant and purchase eligibility. Klar claims that it is the only cash back debit card currently available in the Mexican market. Additionally, it has issued over 25,000 credit lines among these 200,000 customers during this time frame.

“We’ve built a new banking infrastructure core that aligns with the financial needs of consumers and allows us to service a massive segment of the population in Mexico that has previously been left behind when it comes to financial services,” Stefan Moller, Klar's CEO and another co-founder, said in the release.

In September 2019, Klar raised $57 million in two fundraising rounds that included Mouro Capital as an equity investor. The bulk of that fundraising effort came in the form of a $50 million debt financing from San Francisco-based Arc Labs, according to Crunchbase, a website that tracks investments in private companies.

According to the National Banking and Securities Commission of Mexico (CNBV), the number of personal credit cards owned by consumers in the five years spanning 2014-2018 has remained relatively stagnant. Klar’s claim that “a mere 10% of the adults in the country” own credit cards aligns with the government’s estimates that have ranged between 11% to 12% for the last decade.