Mexican payments startup Klar raises over $57 million
Klar has completed two funding rounds — one for equity and one for debt — raising over $57 million in funding, including Santander’s InnoVentures as an equity investor.
The two funding rounds were completed simultaneously. The $7.5 million seed equity round included five different venture capital firms including Santander InnoVentures, FJ Labs, Aspect Ventures, Quona Capital and Western Technology Investment according to Crunchbase, a website that tracks investment in private fintech startups. The $50 million debt financing round was provided by San Francisco-based Arc Labs according to Crunchbase News.
Mexico City-based Klar is positioning itself to drive increased financial inclusion in Mexico and provide better pricing for credit cards. It is offering a unique type of checking account that comes with a revolving line of credit that can be accessed through its app or using its Mastercard. The company is targeting the large unbanked population in Mexico as well as competing with existing credit cards in the market. Based on data from the World Bank, only 44% of Mexican adults have a bank account, while according to Klar fewer than 15% of Mexican adults hold a credit card.
CEO and co-founder Steven Moeller told Crunchbase News that the company is aiming to offer bank accounts to half the country that does not have a bank account. Additionally he stated that its credit lines will have interest rates ranging in the mid-40 percent range, which is much lower than the average 60%+ interest rate on credit cards in Mexico.
As an example of high priced credit cards in Mexico, BanCoppel Bank offers a Visa Classic credit card with an annual interest rate of 63.5% and when additional fees are added the total average annual interest rate rises to 86.2%, excluding VAT. American Express offers a basic credit card in Mexico with an average annual interest rate of 45.24% and a total average cost of 60.3%, excluding VAT. In comparison the Federal Reserve reported that the average credit card interest rate in the U.S., as of May 2019, was about 15% for all cards and just over 17% for cards that were revolving.
Klar offers its users up to 4% cash back on purchases based on their monthly transaction profile. The Klar card is controlled by an app that allows users to lock and unlock the account and provides real-time spending visibility. The app also allows users to send P2P payments to other Klar users and banked adults. The company claims that a Klar account can be opened in only three minutes.