Why we invested in Levo
The older members of the Backbone team still remember an age in which it made economic sense to save some money for “rainy days”. Today, the extremely low interest rates in Europe make classic savings products unattractive, but should you still want to open a savings account, the process is fairly straightforward: either you go to your local “Sparkasse” which is usually only minutes away and has no waiting line or you use digital alternatives such as Raisin DS.
In Latin America, particularly in Mexico, the situation couldn’t be more different: Interest rates are much higher but so is inflation. Opening a bank account is extremely cumbersome and involves high fees. This results in around 30–50% of the Mexican population being unbanked (depending on the definition). The Mexican banking market is highly concentrated so there is little incentive for incumbents to lower the fees or launch new products. During our interviews with potential customers of Levo, we were stunned by the fact that nobody had found a way to save money apart from literally storing it under the mattress. This lack in supply is met by pent-up demand: Mexico’s population is relatively young (>40% under the age of 25) and the smartphone penetration is en par with China’s.
Levo is addressing this demand: via its app, customers can access a term-deposit marketplace via which they will be able to choose between several local banks’ offerings and get the best rates available — without having to cue for hours in cities far from home. And we were not the only ones impressed by Salvador’s and Max’ vision and potential — Levo is part of YC’s S21 batch.
2021 may well be the tipping point for Latam’s startup ecosystem: Startup funding in Latam in Q2/21 alone was 5x of an average quarter in 2020. Mexico has been putting itself at the forefront of financial innovation by being the only country in Latam to pass a law deliberately easing regulation for Fintechs.
We are very happy to be able to play a small part in Salvador’s and Max’s quest to enable millions of people to do what we consider to be one of the basic financial needs: save money for the future.