Nigerian start-up Kuda Bank relied on a new API-based infrastructure with a set of personalized and generally cheaper banking services to compete with existing companies in the country. In the past, it has been growing for several months and is driving its expansion, and now it has completeed another round of funding.
After the impressive growth previously recorded, another round of funding estimated at $500 million commenced. Kuda, a Nigeria-focused bank says it is now ready to be launched in more countries. In the words of co-founder and CEO Babs Ogundeyi, it is creating a new banking service for "Africans on Earth".
Babs said in an interview that we have been deploying a lot of resources in our Nigerian environment. But now we are doubling down on the expansion and our idea is to build a strong team for Kuda's expansion plan. We still believe that Nigeria is an important market and we don't want to be distracted, so we don't want to disrupt these businesses too much. This is a strong market and competition. This is what we feel we need to firmly understand. Therefore, the funds are used to invest in expansion and have more experience related to expansion in the company.
Kuda now has 1.4 million registered users, which is more than double of the 650,000 registered users it had in March, this figure was revealed while announcing the $25 million Series A financing led by Valar Ventures.
The latest round of funding came from existing investors. A collaboration between Valar Ventures and Target Global, it also includes SBI and some former angels who are also involved. At the beginning and end of the B round of financing, Kuda did not take the initiative to raise funds.
"We feel Babs and Musty"- co-founder and CTO Musty Mustapha -"Ambitious on another level. For them, this is always about building a pan-African bank, not just Nigeria Leader," said Target partner Ricardo Schäfer who led the contract. "The prospect of having more than 1 billion people from the beginning really caught my attention."
You may notice that only four months have passed since Kuda's last announcement of financing. Several rounds of stocks raised in rapid succession, sometimes only a few months apart, now seem to be a top priority. Part of the reason is that a large amount of money is now injected into the company, but it is also affected by market conditions. When the company in question shows all the right growth indicators and works in a particularly active field, many people will join when it gets hotter.
Other powerful financial technology companies have emerged around the world based on a model similar to kuda. For example: WeBank in China, Revolut and N26 in Europe, Chime and Varo in the United States (US). In this sense, Africa may be the last untapped region in the banking industry, which is one of the reasons why Kuda appears promising.
There has been a signal to this effect over the years. A 2018 McKinsey report on the African banking industry pointed out that there is a huge interest in digital financial services, and this growth will be driven by rapidly developing middle-class consumers, while at the same time, the available financial service companies will continue to phase out . For most of the population, there are still about 300 million people on the continent without bank accounts. Kuda has established its own service based on these three basic factors.
Kuda is not the only one who builds, grows and grows. Other companies raising funds for new fintech businesses include payment company Chipper Cash and Airtel Africa. But Kuda stands out because it uses its own banking license to build its services. This gives the company another credibility in a continent where customers of already existing banks may develop cold feet towards new entrants.
Kuda’s business strategy will evolve as it hopes to become a regional player. It's unclear which country may emerge Kuda’s next businesss location. But Babs did point out that expansion is on the way. Kuda's first step towards credit through an overdraft line, is a sign of future development.
"We pre-approved overdraft for the most active users," he said. In the second quarter, it obtained the credit ratings of more than 200,000 users and launched a loan worth 20 million US dollars. He said that with a 30-day refund, so far, due to company practices, defaults have been "minimal."
"We use all the customer data we have and assign overdraft rates based on customer activities, so that it is not a burden for reimbursement," he added.
Andrew McCormack, General Partner at Valar Ventures, who co-founded the company with Peter Thiel and James Fitzgerald, said that the immature potential of the market and how Kuda approached it was the reason for his decision to invest in this startup again.
"This is our first investment in Africa, and the rapid growth in the last four months confirms our initial confidence in the team," he said. "As young people in the continent are eager to receive digital financial services, we believe that Kuda's transformative impact on the banking industry will spread throughout Africa, and we are proud to be a part of them."
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