Joanna Drake Earl
General Partner, Core Ventures Group
Most Silicon Valley investors anticipate technology trends by staying close to the most audacious entrepreneurs in their network. We are no exception and are delighted to occasionally showcase the world-class founders we rely on. Today we’d like to introduce you via interview to Adal Flores, Founder and CEO of Kueski, the leading fintech company in Mexico.
Q: What inspired you to change your focus from online video at your previous start-up, to building the first on-line consumer lending platform in Mexico?
A: It was my frustration with the fact that 85% of the Mexican population did not have credit cards to pay for our customer’s online content at my previous start-up that led me to start Kueski. At first, we were launching an online purchase financing solution in Mexico to enable people to make purchases online. But we discovered that the fundamental problem was not about payment, but rather, the lack of consumer credit in general. This started with the Tequila Crisis in Mexico back in 1994. At that time, the financial system was collapsing and the Central Bank of Mexico established more strict prudential regulation to all banks, making it more difficult to offer loans to anyone working in the informal economy or without credit history in Mexico. Over two decades later, still, 60% of Mexicans are without bank accounts, 85% without credit cards and 95% have no access to banking overdraft services.
Q: What is Kueski’s product?
A: Kueski offers 24/7 online micro-loans in Mexico. Our product is the most convenient, easy and fast way to obtain a loan online. We use alternative data sources and Artificial Intelligence to assess credit risk and grant our customer loans in minutes.
Q: Explain how Kueski employs AI.
A: Kueski applies Machine Learning technology across all aspects of our customer engagement, from the moment a prospective customer arrives at our web site, during their initial credit assessment, and through to loan collections.
The first algorithms we developed were Machine Learning applied to loan decision-making. We are currently developing our 10th generation of models for credit quality assessment and real-time decision-making.
Additional ??AI applications include our Hard Fraud detection and client Credit Capacity evaluation models, from which we are able to optimize the actual size of customer loans. Finally, we apply Machine Learning models in the loan collection process to optimize our direct-debit efforts.
Q: What are some of the biggest insights gained through your use of AI?
A: Just how effective Machine Learning is to fully comprehend our customer, and far better than human analysis. By analyzing the patterns of movement and typing at the time of credit application, our systems pick up an enormous amount of “signal.” If a prospective customer types extremely fast, they have a greater likelihood to be fraudulent. If they type slowly, they tend to have lower credit capacity. And if they type fast, but not extremely, they tend to be excellent customers with low default rate.
Q: What are the major trends you see emerging in fintech?
A: I see four major trends: 1) application of AI to new areas of underwriting, wealth management (robo-advisors), and insurance risk management; 2) Lending-as-a-Service offered by start-ups to Banks in order to improve underwriting and reduce Bank default rates; 3) the use of blockchain for tracking purposes; and 4) Regulation Technology (RegTech) to ensure regulatory compliance.
Q: What do you think is the biggest misconception held about fintech right now?
A: Fintech entrepreneurs are often seen as threatening to banks, but in reality, these startups are collaborating with banks to deliver more value to their customers. Banks are not being replaced, but rather, they are developing more powerful products by leveraging emerging technology.
Q: If you are a Japanese executive working in the traditional banking industry, what advice would you lend?
A: Build relationships with the leading startups in your ecosystem. At Kueski, we are building partnerships with many of the top banks in Mexico. Our partnership thesis is focused on offering them better customer and market insights and in exchange, we benefit from affiliation with their brands and access to their customer base.