Mexican challenger bank takes a page out of MPesa's inclusion book

Investors have made a $10 million bet on Stori, which is pushing mobile money over a branch network to bring more consumers into Mexico's banking system.

Bertelsman and SourceCode lead the Series A round, which also included existing investor Vision Plus Capital. The Mexico City-based Stori will use the money to reach a 100,000 customer target through a mix of advanced data management and artificial intelligence.

The recent launch of Stori’s digital credit card, called Stori Lider, which operates on the Mastercard network was limited to an initial block of 2,000 consumers who had already pre-registered on the company’s website and were placed on a waitlist.

The digital credit card and mobile app acquisition approach takes a mix of successful global efforts in driving financial inclusion as well as the latest approach to garner new card adoption such as the Apple Card.

Stori hopes to "leapfrog" development, a common strategy in emerging markets that lack traditional banking or phone networks, but have a fast expanding mobile economy. More than 70% of Mexicans use a smartphone, according to Statista.

Developing nations that have used traditional banks to drive financial inclusion have generally seen lackluster results despite government incentives and penalties. In Mexico, only 36.9% of consumers over the age 15 have a financial account according to the World Bank with most of those accounts being sourced by a traditional bank. Only 5.6% of consumers in Mexico have a mobile money account, creating potential upside.

Many countries in Africa have taken the approach of promoting mobile money accounts, such as MPesa to drive financial inclusion. Kenya for example has an overall financial inclusion rate of 81.6% with approximately 73% of the population having a mobile money compared to just 55.7% having a traditional bank account. All across Africa where mobile money accounts are being encouraged their adoption often exceeds that of traditional banks and helps drive overall financial inclusion.

In countries where mobile money accounts lack support, such as Nigeria, which is Africa’s largest country by population, financial inclusion barely exceeds Mexico’s level.

Applications for Stori's card are done exclusively through its mobile app with a credit decision rendered in the app and followed-up by an email notification. Consumers can request a specific credit line which is subject to credit approval and after six months could increase based on payment history and Stori’s underwriting rules.

"We are very excited about Stori because we see the enormous Mexican market opportunity of using fintech technology to expand the financial coverage to millions of Mexican consumers. We are also very honored to partner with the very experienced and visionary Stori team,” said William Zhao, head of fintech at Bertelsmann Investments in a press release.

Stori has raised more than $27 million in funding over four rounds since 2018 according to Crunchbase, a website that tracks investments in private companies.

Stori is a SOFOM enterprise in Mexico (Sociedad Financiera de Objeto Múltiple) which allows it to offer loans and credit lines without the full banking license required by traditional banks. The Dallas Federal Reserve Bank has observed that SOFOMs have been instrumental in driving increased loan availability within Mexico. Stori also has the sponsorship of Banca AFIRME sharing its infrastructure of more than 6,200 ATMs and 500 service centers.