London-based, Nigerian-operating FinTech startup Kuda closed a $55m Series B co-led by Valar Ventures and Target Global at a valuation of $500m.
It plans to use to double down not just on new services for Nigeria, but to prepare its launch into more countries on the continent, and in the words of co-founder and CEO Babs Ogundeyi, to build a new take on banking services for “ever African on the planet,” Techcrunch reported.
Kuda now has 1.4 million registered users, which is more than double the number it had in March when it had 650,000 registered users — a figure it revealed when announcing its Series A of $25m led by Valar Ventures.
It offers a mobile-first, personalised and cheaper set of banking services built on newer, API-based infrastructure and has been on a growth tear in the last several months. Kuda was not proactively raising money at the time the Series B was initiated and closed.
Ogundeyi told TechCrunch, “We’ve been doing a lot of resource deployment has been in our operational entity, in Nigeria. But now we are doubling down on expansion and the idea is to build a strong team for the expansion plans for Kuda. We still see Nigeria as an important market and don’t want to be distracted so don’t want to disrupt those operations too much. It’s a strong market and competitive. It’s one that we feel we need to have a strong hold on. So this funding is to invest in expansion and have more experience in the company with relation to expansion.”
Neobanks are building a new generation disruptive of banking services based around more modern interfaces and infrastructure leveraging API-driven embedded finance. The industry has been growing at a rate of nearly 50% annually in terms of revenues and is projected to be collectively a $723bn market by 2028.
Within that, a number of strong players have emerged across the globe such as Brazil-based Nubank, Revolut and N26 in Europe, WeBank in China, Varo and Chime in the US among them.
Kuda is undoubtedly leading the subsector in Africa as more people continue to demand FinTech services. A report from McKinsey on banking in Africa in 2018 identified a surge of interest in financial services that were delivered digitally, and that growth would be driven by a rapidly evolving middle class of consumers.
While Kuda is unique among the neobanks in that it is building its services with its own banking license in hand, it is not the only one building and raising and growing. Others raising money for new FinTech plays include payments company Chipper Cash, Airtel Africa, online lender FairMoney and more.
Kuda’s initial business model was built around providing banking services to people who still also held accounts with incumbent banks: people would have their salaries paid into their old accounts, and then transferred out to be spent and used in other ways via their Kuda accounts. Ogundeyi said that this is gradually shifting and more people are now bringing both paying-in and paying-out to their Kuda accounts.
While Ogundeyi was tight-lipped about which countries are Kuda’s next targets, he did note that its most recently-launched product, Kuda’s first move into credit by way of an overdraft allowance, is a sign of the things to come. In Q2 it qualified over 200,000 users and pushed out $20m worth of credit. With a 30-day repayment so far default has been minimal because of the company’s approach.
Andrew McCormack, a general partner at Valar Ventures who co-founded the firm with Peter Thiel and James Fitzgerald, said that the still-nascent potential of the market, and how Kuda is approaching that, were behind its decision to invest in the startup another time.
“Kuda is our first investment in Africa and our initial confidence in the team has been upheld by its rapid growth in the past four months,” he said. “With a youthful population eager to adopt digital financial services in the region, we believe that Kuda’s transformative effect on banking will scale across Africa and we’re proud to continue supporting them.”
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