Digitt, a startup offering credit card refinancing for Mexican borrowers, has secured a $50 million debt facility from CoVenture Management to expand its loan book.
Why it's the BFD: Predatory credit card lending remains a major problem in Mexico and Latin America due to low adoption and lack of competition.
How it works: Digitt offers fixed-term refinancing options to help Mexican credit card users pay off their debt more quickly and at much lower interest rates.
- Digitt's fixed-installment loans are around 14 months long on average, with an average loan size of $2,200 and a maximum of $8,000.
- According to founder David García, their average interest rate is around 37%, "which in most cases is at least half of what the customer was previously paying."
The big picture: Many Mexican credit card holders — even those with established credit and verifiable income — are subject to interest rates between 60% and 150%.
- "There are no anti-usury laws, no cap for interest rates and no cap for fees, so banks can charge as much as they want," García says.
- As a result, the top five banks in the country, which control about 80% of Mexico's market share, generate more than $20 billion per year in interest revenue from those users.
Between the lines: Unlike many consumer banking or fintech startups in the region, Digitt is not targeting the unbanked but is explicitly focused on serving consumers with prime or near-prime credit ratings.
- "There are 30 million people in Mexico who are already part of the banking system, have a credit history and have more complex needs," García says. "They are basically being squeezed by traditional banks."
- The focus on that segment has led to healthy performance and an extremely low loss rate of below 2%, he adds.
Context: García and co-founder Manuel Álvarez previously worked on PagoSafe, a fraud prevention startup for credit and debit cards.
- Since its founding, Digitt has raised $4.8 million in equity financing from Clocktower Technology Ventures, FJ Labs, Gilgamesh Ventures, Yes VC, Angel Ventures Mexico and New Stack Ventures, among others.
