ePesos is a Mexican payroll advance company enabling the country’s workers to access their earnings in advance through the company’s technology-forward platform. We sat down with Oscar Robles, CEO of ePesos, to discuss ePesos’ history, the payroll advance industry in Mexico, and their recent work with Percent.
What led to ePesos’ founding, and what have you and your company learned in eight years of existence?
Our product launch was based on learnings from the market and insights we teased out of our customers and users. In general, we found that there are three big problems we are solving for:
- Wages for Mexican workers are extremely low. 80% of workers make less than $1,000 USD a month. As such, families living paycheck-to-paycheck don’t have the savings required to face financial emergencies.
- Wages can be very volatile, especially for workers in Hospitality, Manufacturing, and Service industries. There is unpredictability in the amount a worker will receive because of tips, productivity pay, bonuses, etc. If you don’t know how much you’ll make next month, how can you plan your finances?
- Timing of pay is beneficial for the company but not for the employee. Why do workers need to wait to get paid? Employers have funds tied up for no good reason. We let the employee access his/her entire wage whenever it’s convenient for the employee.
Taken together, these headwinds make it virtually impossible for low-wage workers and their families to properly manage their finances. That’s where we step in. We give them a digital tool that can help them address these pain points 24/7/365.
What is something most investors don’t understand about payroll advance?
Our analysis of the Mexican landscape shows that there tend to be two broad types of financial service providers. On one hand, you have traditional financial institutions (i.e. banks) with high-cost structures. Because the cost to serve is so high (think branches and ATMs) they typically cater to higher-wage consumers with higher loan amounts. On the other hand, you have FinTechs that offer consumers very small unsecured loans at very high-interest rates to compensate for the risk.
Our approach from the start has been different. Through our business model, we are able to reach a wide range of consumers, regardless of their income status, and offer very competitive financial services by looping in their employers. Our product ends up being win-win-win. Employees are able to access low-cost financial services, employers are able to lower turnover by offering more benefits, and ePesos is able to scale faster by having the employer communicate the attributes of our products. Today, we offer our products to 150+ employers across 17 states via a branchless FinTech model.
How does the payroll advance industry and adoption by employees differ in Mexico when compared to other international markets?
Unlike developed markets, one of the realities of the financial services industry in Mexico is that there is a high degree of mistrust between users and lenders. This often stems from the fact that financial institutions charge users through obscure fee structures that less educated consumers don’t understand, or the customer service they provide is too complex by design. To combat this reality, we have focused on creating a:
- Very simple commission structure: There is just one commission and the employee always knows how much that is in Peso terms.
- High-touch service: Our Customer Support and Operations teams have a 30-second response time benchmark. When users have questions, we make sure that specialists are assisting them live via Chat or screen-sharing.
- Intuitive user interface: We invested heavily in UX/UI design to ensure ease of use, as a result our users typically use our products several times each month.
What future developments do you look forward to in the payroll advance industry?
Our goal is to continue providing financial services for specific use-cases that are prevalent in the markets we operate in. For example, we’ve incorporated bill payments and airtime top-ups in our platform to give users a simple way to pay for everyday expenses. Going forward, we want to provide more services and products in our app that enable users to seamlessly pay for things they need with their payroll advances (e.g. eCommerce).
How has ePesos benefitted from partnering with Percent?
There are two broad buckets where Percent has really helped us improve our business.
First, Percent is a modern institutional lender that provides capital for our growth. We love partnering with institutions that have innovation in their DNA. Percent has been very flexible in structuring our deal and has enabled ePesos to create a robust borrowing structure that can meet our needs on an ongoing basis.
Second, Percent represents the best-in-class underwriting and lending practices. During our time working with their Credit Team, we were able to improve our own underwriting policies and dashboards, and they have helped us rethink how we mitigate risk. It’s great to have such an experienced team backing us and pushing our thinking.