Mexican challenger bank Albo raises new cash

Darren Sinden

In a rapidly developing economy in which half of the population do not have a bank account, yet over 60% of citizens own a smartphone, Albo sees an opportunity, as clearly do its VC investors

The fundraising rounds continue for challenger and neo banks, this time Mexico’s Albo being the subject of fresh investment.

The business, which describes itself as Mexico’s leading challenger bank, secured $45 million in new funding from investors such as Valar Ventures, Greyhound Capital and Flourish Ventures.

Albo has raised a total of $72.10 million through 5 funding rounds. The banking start-up has amassed almost half a million customers and has established a network of 30,000 retail locations, where its representatives can take deposits from Albo customers.

Albo’s business model is aimed at exploiting a liberalisation of the banking and fintech sectors in Mexico along with initiatives which are designed to increase access to such services in an economy in which half the population does not have a bank account.

Albo’s customer base of around half a million customers represents 40% of the Mexican digital banking market according to data from Apptopia. That figure contrasts sharply with a population in Mexico of 128 million people.

The average age in Mexico, however, is just under 28 year of age and 83% of its population live in urban areas, 12 million of whom are in the capital Mexico City. Added to this, 60% of the population owns or uses a smartphone, so there is clearly an opportunity for Albo and other digital banking services.

However, although wages in Mexico have been improving over the last five years, they only average around $20 per day according to data from the Secretariat of Labour and Social Welfare.

Despite this, Albo intends to use the money it raised this week to expand its offering beyond a bank account and pre-paid debit card and to move into insurance and micro-lending products.

Albo faces competition from established banks, many of which are foreign-owned by the likes of BBVA, Santander and HSBC, of which BBVA Mexico is the largest.

Of course, the banking sector in Mexico, like much of the real economy, has to operate in the shadow of money laundering and the notorious cartels, which creates its own challenges. Just this week the Mexican Senate passed legislation that would oblige the country’s central bank to “buy up” excess cash that commercial banks cannot return into the financial system.

These new rules were suggested as a way to help migrant workers to pass on cash, which previously introduced tighter financial controls have made difficult.

However the proposals have angered the central bank which feels its independence is being compromised, and commercial banks who believe such arrangements could be open to abuse by money launderers. The bill has yet to be passed into law and will need to be approved by the lower house in the Mexican legislature before it is.

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