Kuda Bank, the London-based Nigerian startup that hires incumbents in the country with a personalized and often cheaper set of banking services based on newer API infrastructure, has seen a growth tear in recent months, and to fuel its expansion, it has now raised another round of funding.
TechCrunch has learned, and confirmed with Kuda, that the startup has shut down, through its London entity, a $ 55 million Series B – money it plans to use to not only double new services for Nigeria, but to prepare for its launch in more countries on the continent, and in the words of co-founder and CEO Babs Ogundeyi, to build a new approach to banking services for “always African on the planet”.
The funding was made for a valuation of $ 500 million, and it builds on impressive initial growth for the startup.
“We have done a lot of resource deployment in our operational entity in Nigeria. But now we are doubling our expansion and the idea is to build a strong team for Kuda’s expansion plans, ”Ogundeyi told TechCrunch in an interview. “We still see Nigeria as an important market and we don’t want to be distracted, so we don’t want to disrupt these operations too much. It is a strong and competitive market. This is an area on which we believe we need to have a strong grip. This funding is therefore used to invest in expansion and to have more experience in the business in terms of expansion.
Kuda now has 1.4 million registered users, more than double the number it had in March when it had 650,000 registered users – a figure he revealed when announcing his Series A of $ 25 million led by Valar Ventures.
We understand that this latest Series B was a relatively quick domestic turn, i.e. it came from existing investors. Co-led by Valar Ventures and Target Global, it also includes SBI and a number of former angel investors who also participate. Kuda was not proactively fundraising at the time Series B was launched and closed.
“We felt that Babs and Musty” – Musty Mustapha, the co-founder and CTO – “are ambitious on another level. For them, it was always about building a Pan-African bank, not just a Nigerian leader,” he said. said Ricardo Schäfer, the Target partner who led the cycle for the company. “The prospect of banking over a billion people on day one really stood out to me early on.
You might notice that it’s only been four months since Kuda last announced a funding round. Rounds of capital raised in rapid succession, sometimes within months of each other, seem to be the order of the day right now, fueled in part by a lot of money being pumped into the business at the moment, but also by the state of the market. When the business in question shows all the right indicators for growth and is working in a particularly busy area, many will strike when the iron is hot. (GoPuff, which last week confirmed a $ 1 billion raise just months after a previous round, is another example of what’s happening in another corner of the world.)
Neobanks – fintechs building a new generation of disruptive banking services based on more modern interfaces and infrastructure based on the concept of API-driven integrated financing – has been one such area, with growth of nearly 50% per year in terms of revenue and is collectively expected to be a $ 723 billion market by 2028.
Within this framework, we see a number of strong players emerging across the world built on this model – Nubank in Brazil, Revolut and N26 in Europe, WeBank in China, Varo and Chime in the United States among them. In this regard, Africa may be the last major untapped region when it comes to banking, one of the reasons Kuda is receiving special attention and enjoying high adoption.
The writing has been on the wall for years. A McKinsey report on banking services in Africa in 2018 identified a resurgence of interest in digitally delivered financial services, and that growth would be driven by a rapidly changing middle class of consumers, while continuing the death of financial services. accessible. for the majority of the population with some 300 million people still unbanked on the continent. These are the three basic factors on which Kuda has built his own service.
Kuda is not the only one to build, raise and grow. Others are raising money for new pieces of fintech, including payment company Chipper Cash, Airtel Africa, online lender FairMoney and more.
However, Kuda is unique among neobanks in that it builds its services with its own banking license in hand.
This means that it can be more flexible and faster when it comes to creating new products or refining existing products, and it gives the company another level of credibility in a region where those who were already doing dealing with incumbents may be more wary of new players.
Indeed, Kuda’s initial business model revolved around providing banking services to people who also had accounts with legacy banks: people’s salaries were paid into their old accounts and then transferred to be spent and used again. ‘other ways through their Kuda accounts. . Ogundeyi said that this is gradually changing and more and more people are bringing both payouts and payouts to their Kuda accounts.
Ogundeyi wouldn’t say which countries would be Kuda’s next targets. But he noted that his most recently launched product, Kuda’s first credit entry through overdraft, is a sign of things to come.
“It’s a unique product, a discovery for which we prequalify the most active users,” he said. In the second quarter, it qualified over 200,000 users and granted $ 20 million in credit. With a 30-day refund, he said, so far the default has been “minimal” due to the company’s approach.
“We use all the data we have for a client and affect the proportion of the overdraft based on the client’s activities, aiming to ensure that it is not a charge to be reimbursed,” he added.
Andrew McCormack, general partner at Valar Ventures who co-founded the company with Peter Thiel and James Fitzgerald, said the still nascent potential of the market and how Kuda approached it was the driving force behind his decision to invest in the startup again. .
“Kuda is our first investment in Africa and our initial confidence in the team has been confirmed by its rapid growth over the past four months,” he said. “With a young population keen to adopt digital financial services in the region, we believe Kuda’s transformative effect on the banking sector will spread across Africa and we are proud to continue to support them. “