Cashea: A Credit Solution for Post-Hyperinflation Venezuela

Cashea: A Credit Solution for Post-Hyperinflation Venezuela

In the midst of the economic crisis and hyperinflation plaguing Venezuela, an unexpected solution has emerged for consumers: Cashea, an application that allows users to buy now and pay later. Despite the decreasing utility of credit cards, this innovative app is drawing crowds of shoppers back to the stores.

Cashea Rescues Consumers

During the past week, residents of Caracas flocked to Venelectronics, an electronics store, to take advantage of Black Friday deals. Remarkably, the majority used Cashea to make purchases, an application that has gained over 1.2 million users in just over a year, filling the void left by limited access to credit.

While the app was created in Argentina, its co-founder, Pedro Vallenilla, asserts that it was "crafted for Venezuela." The socialist government's decision in 2019 to restrict credit to combat inflation created a pent-up demand for consumer credit, and Cashea became the answer to this need.

Government measures drastically curtailed bank credit in Venezuela, leaving most credit cards with monthly limits of around US$60. In March, consumer credit represented only 2% of total bank portfolios in the country, according to the Caracas-based consultancy Albus Data.

Cashea Fills the Void

With nearly useless credit cards, Cashea has found its niche by offering Venezuelan consumers access to products through a four-installment, interest-free payment system. The application, utilizing various data from metadata to geographical location to assess a user's solvency, has become a viable option for those who previously had no access to credit.

Cristian Nieves, a 23-year-old manicurist, shares how he bought a mobile phone the same day he downloaded the app in July. He took advantage of Black Friday discounts to purchase gifts and clothing, financing half of his purchase with Cashea. Over 95% of Cashea users have similar stories, with the average age of customers being around 30 years.

Such services have become increasingly popular worldwide, allowing consumers to stretch their budgets. However, critics argue that this model fuels irresponsible spending and debt problems.

Success and Growth of Cashea

Since its launch in October 2022, Cashea has changed the game for retailers, boosting sales. With default rates decreasing from 3% to 1.8%, the app raised over US$1 million in its first funding round in 2022. Vallenilla projects adding another 800,000 users in Venezuela between Black Friday and the end of the year, with plans to expand the business to two more countries next year.

Cashea has become a lifeline for Venezuelan consumers, providing flexible payment options in a time of economic crisis. Its success has transformed how retailers and consumers approach shopping, demonstrating that when alternatives are offered, consumers are willing to buy more. With expansion plans, Cashea could be the key to revitalizing commerce amid the economic challenges facing the country.