Africa has some of the world’s fastest-growing economies. Nigeria currently being the biggest single economy in the continent. The adoption of new information and telecommunication technologies has been one of the most rising activities with many start-ups joining the market. One of Nigeria’s rapidly growing start-ups is Kuda, a mobile-first challenger bank that offers a diversified set of innovative banking services to its clients through a friendly mobile application. Despite all challenges caused by the ongoing pandemic, Kuda maintained a steady growth.
Last month, the company announced that it has raised USD 10 million, which is considered the biggest seed round ever to be raised in Africa. Commenting on the announced news, Kuda’s CEO, Babs Ogundeyi, mentioned that the funding comes on the back of strong demand for its services and its ambitions. “We want to bank every African on the planet, wherever you are in the world,” he said in an interview. Since it was launched, a little more than a year ago (in September 2019) Kuda has had over 300 thousand customers, where it processed nearly USD 500 million of transactions monthly.
Challenger banks are usually small in nature than traditional banks and they offer alternative solutions that complement or replace the services offered by other banks. However, Kuda has more distinct factors that differentiate its offerings from other challenger banks. For example, while many of its counterparts partner with traditional banks to facilitate the services they offer to their clients, Kuda has obtained a microfinance banking license from the central bank of Nigeria and built its own user-friendly platform and value-added services around money management.
“Despite the uncertainty many are feeling around the pandemic, the relative success of Kuda and the optimism around the future of challenger banks, helped the company close this seed round relatively easily.” -Babs Ogundeyi
“We have built the core banking services in-house so we own the full stack. We may choose to partner on certain products, but we don’t have to,” said Ogundeyi. He further explained that the plan may be use full licenses in what he considers key regions but possibly partner in others where the existing infrastructure makes it more logical to do so. “As a bank you need to be able to lend, and in Nigeria if you don’t have a full license it’s hard to lend and make money. That is why we need to be licensed,” he added. Currently, Kuda manages payments, transfers and issues debit cards in partnership with Visa and Mastercard.
“Nigeria has the potential to be a great national economy if it’s well harnessed. Technology is contributing significantly to that, that is why there is a lot of interest and why we are excited to be there.”
While opening an account is free of charge, Kuda makes money through other services such as phone credit and bill payments. It also manages its float and invests it in treasury bills, mutual funds and soon other credit products. After this great achievement, Kuda expects further growth looking at the young population with 70% of Nigerians are below 30 years old. Ogundeyi noted that most of them are “smart and entrepreneurial.” While some users are already running some of their small business banking through Kuda, a new platform tailored small business will be launched by Q1 2021, he added.
The USD 10 million is being led by Target Global, Entrée Capital and SBI Investment in addition to a number of other notable individual fintech investors. “The emergence of digital challenger banks, providing customers with a free, digital and significantly better banking experience compared to services offered by traditional banks, has seen huge success across the globe. Kuda is one of Africa’s leading digital challenger banks and one of the fastest growing fintechs on the continent.,” said Dr Ricardo Schäfer, Partner at Target Global, in a statement