Contxto – The waters of debt refinancing are moving and it’s Mexican fintech Digitt that’s being further enabled to throw debtors a lifeline following a US$500,000 pre-seed investment round led by ID345, according to a recent press release.
The fintech will use these funds to further develop their technology and make their operations more efficient. Specifically, it will improve and speed up risk analysis via machine learning. In addition, Digitt plans to hire more staff for their risk, engineering, and acquisition departments.
Digitt had previously raised debt financing from other investors and family offices.
Killer debt and Digitt
It’s there. Waiting and preying on your pockets. It doesn’t move but you can feel it circling the back of your mind ready to bite down and rip a piece of your wallet away. Sitting on your kitchen counter is a credit card bill reminding you of your debt.
For people who’ve experienced deep debt, there are few things as financially disheartening as paying a bank’s high rates. This reality affects millions of Mexicans who are up to date on their payments and yet still indebted with high-interest rates.
It’s this specific market Digitt targets.
Founded in 2016, this startup launched its first product in January of 2018. Since then, Digitt has sought to offer loans at yearly interest rates ranging from 20 to 35 percent. Debtors then pay these loans in 9, 12 or 15 monthly installments.
To apply a person must make an estimate of their debt with the corresponding credit card. They then apply online by completing a form and within 24 hours the startup will reportedly get back to the applicant.
If approved, the debtor will receive Digitt‘s credit terms. Upon signing the agreement, the debt is transferred and Digitt completes the credit card payment on their behalf. Meanwhile, the fintech will charge the debtor’s bank account as per the agreement’s terms.
Debt in Mexico
According to the International Monetary Fund, consumer debt in Latin America is rising.
While Mexico doesn’t have the highest percentage of indebted consumers in relation to the country’s Gross Domestic Product (GDP) in the region (that place belongs to Chile), it takes the seventh spot.
Moreover, in Mexico, the average credit card debt adds up to MXN$135,000 (around US$7,000) according to banking firm, Resuelve Tu Deuda (Sort Out Your Debt).
See the problem now?
By crunching these numbers it’s increasingly understandable why fintechs that tackle this issue, like Digitt are emerging.