(Bloomberg) -- Venezuela’s economic crisis and raging hyperinflation have rendered credit cards useless, but a new buy now, pay later app is bringing customers back to the checkout line. 

Customers in Caracas flocked to Venelectronics, a large appliance store, last week seeking Black Friday deals. Their purchases were bankrolled by Cashea, which has added more than 1.2 million clients in just over a year thanks to pent-up demand for consumer credit. 

Nearly nine out of 10 customers bought flat-screen TVs and air fryers with Cashea, according to a Venelectronics cashier, Alexander Guillén. 

The app was built in Argentina but “made for Venezuela,” co-founder Pedro Vallenilla, 35, said in an interview from Buenos Aires.

Venezuela’s socialist government essentially choked off credit in early 2019 to help rein in six-digit inflation. The central bank’s measures drastically reduced consumer price gains but severely restricted bank lending and consumer demand. 

These days, most credit cards have monthly limits of about $60. And as of March, consumer credit represented just 2% of total bank portfolios in Venezuela, according to Caracas-based consulting firm Albus Data.

“This has allowed Cashea to fill a huge void,” Vallenilla said of the app, which charges retailers a percentage of each transaction. “Businesses said, ‘enough, we need a solution to give Venezuelan consumers access to products.’”

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More than 95% of Cashea’s users have never had access to credit, Vallenilla said, adding that clients average about 30 years in age. The app uses everything from metadata to geographic location to diagnose a user’s creditworthiness and it allows consumers to pay in four installments with no interest, intervening only if there’s a missed payment. 

Manicurist Cristian Nieves, 23, said he purchased a mobile phone on the same day he downloaded the app back in July. He took advantage of Black Friday discounts to purchase $120 in gifts and clothes, financing half of it with Cashea.

Buy now, pay later services have become increasing popular around the world, helping Black Friday shoppers in the US stretch their budgets to a record $9.8 billion in online spending this year. While the services can help consumers skirt rising credit-card interest rates, critics say their use fuels irresponsible spending and mounting debt problems. 

Vallenilla estimated Cashea will add another 800,000 new users in Venezuela between Black Friday and the end of the year, an average of 20,000 per day. Since the app launched in October 2022 default rates have dropped to 1.8% from 3%, he said.

The app raised more than $1 million in its first investment round in 2022. Vallenilla declined to offer details of future capital raising efforts, but said he wants to expand his business to two more countries next year.

So far, it’s been a game changer for affiliated retailers that have seen sales soar. The average transaction price has increased 30% to $90 since Cashea was introduced, according to financial technology startup’s data. 

“What Cashea has shown is that if you give consumers payment options, they can be encouraged to buy more,” said Henkel García, head of Albus Data. 

--With assistance from Andreina Itriago Acosta.

©2023 Bloomberg L.P.