The surge of BNPL: Interview with Adalberto Flores Ochoa, CEO at Kueski
By Edlyn Cardoza
Buy now, pay later (BNPL) solutions that allow consumers to pay in interest-free instalments are gaining popularity as people seek alternative methods of payments. BNPL gained momentum primarily due to the coronavirus pandemic.
During the pandemic, BNPL has been accelerated by changing consumer behaviours, significantly younger Millenials, and Gen Z. The BNPL industry has modernized instalment payments and layaway to provide consumers with flexible payment options for their purchases. In comparison to credit cards, intended to be used repeatedly, BNPL solutions are applied to individual transactions – appealing to consumers who want to make less of a financial commitment.
The BNPL trend has spawned companies with massive valuations. One such company making waves in Mexico is Kueski, and Kueski is the largest online consumer lender in Mexico that provides financial services for ineligible users for traditional bank loans.
IBS Intelligence sat down with Adalberto Flores Ochoa, CEO at Kueski, to discuss the surge of Buy Now, Pay Later and the future of BNPL.
Q1) Recently, Kueski announced a $202 million equity and debt financing round. What does this investment bring for Kueski?
One of the great opportunities that opens up for Kueski is to continue reducing the financial gap of credit access that is currently very pronounced in Mexico, which can be attributed to the high percentage of unbanked people. We also plan to continue growing our ecosystem of financial products, drive the growth of Kueski Pay and generate more and better job opportunities, especially for our engineering team.
Q2) How does Kueski aim to connect the entire Mexican economy without requiring consumers to have a bank account, a credit card, or a credit history?
Our Buy-Now-Pay-Later (BNPL) solution, Kueski Pay, enables anyone in Mexico to pay for products and services both online and offline, no matter if our customers are unbanked or lack credit history. We do this by turning the credit underwriting process upside down. Instead of collecting basic data from customers through paper applications, we manage thousands of data points through digital applications and apply machine learning to improve our creditworthiness assessment. These models can be updated daily. On the other hand, Merchants can offer our payment solution by using a QR code or making a simple integration with our system. By doing this, we believe we can connect the entire Mexican economy, decreasing the use of cash and informality rates.
Q3) How does Kueski cater to the risk factor in BNPL?
BNPL in Latin America continues to gain momentum, becoming one of the leading payment methods with a reasonably positive perception. However, some challenges need to be considered. The main one lies in fostering financial education in the population on the use of any type of credit product and continuing to develop the technology necessary to determine the payment capacity of users. In countries like Mexico, where the majority of the population works in the informal economy, generating this data is a significant challenge. At Kueski, we leverage machine learning to evaluate hundreds or even thousands of unconventional variables that allow us to offer our products to people not served by traditional financial institutions. Given we launched in 2012, we had a significant head start. Foreign providers do not have access to this data, which represents a massive challenge for them.
Q4) What will the next generation of BNPL products look like?
The BNPL movement is just starting. It will soon cease to be a novelty and will become a demand from consumers worldwide, especially for millennials and centennials who don’t identify with traditional banking products. In the long term, this payment method will represent the highest percentage of transactions in the e-commerce world, even when compared to credit cards and cash on delivery. But we believe that BNPL will be one of the features that FinTech companies will offer. Similar to China, in which AliPay offers HuaBei – their BNPL solution – we believe BNPL will become the wedge to people’s financial lives globally. It is disrupting the credit card industry in a very fundamental way.
Q5) What do you say to critics who say BNPL solutions give consumers a false sense of affordability and increase indebtedness?
The road to financial inclusion involves thinking outside the box to develop products that reach thin-credit-file consumers who otherwise would be excluded from the financial services ecosystem. FinTechs like Kueski prove that these challenges can be mitigated by technology that has a direct line of sight into a customer’s behaviour, profile, and ability to repay a loan.
Our technology uses relevant and timely data sources to assess a customer’s ability to repay a loan and ultimately plays a vital role in reaching millions of people currently living and working outside of the formal economy.
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