Kuda Bank, a London-based, Nigerian operating startup that prides itself as the “bank of the free”, working to provide cheaper and personalized mobile banking services to Africans has secured $55 million in a Series B round to accelerate its expansion across Africa.
The Series B funding which was an inside round was co-led by existing investors Target Global and Valar Technologies. Other participants include Japan Based Strategy Business Investor SBI and a host of previous angel investors.
It is worth mentioning that at the time this round was initiated and closed, the startup wasn’t actively raising money seeing that it just raised a Series A in March. But the startup’s impressive early growth and significant adoption amongst users in Nigeria led investors to pump more funds into the startup.
“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,” said Ricardo Schäfer, the partner at Target who led the round for the firm. “The prospect of banking over 1 billion people from day one really stood out for me at the beginning.”
The startup has witnessed an impressive early growth currently has about 1.4 million registered users, more than double of the 650,000 users it had when Valar Ventures led its $25 Million Series A round in March this year.
Speaking on the raise, co-founder and CEO Babs Ogundeyi told TechCrunch that “We’ve been doing a lot of resource deployment, in our operational entity in Nigeria. But now we are doubling down on the expansion and the idea is to build a strong team for the expansion plans for Kuda.” However, the startup did not reveal the countries it will be expanding to.
The CEO added that “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 stronghold on. So, this funding is to invest in expansion and have more experience in the company with relation to expansion.”
Founded in 2018 by Babs Ogundeyi and Musty Mustapha, Kuda Bank’s initial business model was to provide banking services to people who still held accounts with incumbent banks. Their thinking was to provide an alternate banking experience where people would have their salaries paid in their old accounts and then transferred into their Kuda accounts to be spent and used in other ways.
But after launching its overdraft service this year, the startup noticed that this notion was gradually changing as more people were now using their Kuda accounts for paying-in and paying-out.
“It’s a unique product, an overdraft that we pre-qualify the most active users for,” he said. In Q2 it qualified over 200,000 users and pushed out $20 million worth of credit. With a 30-day repayment, he said, so far default has been “minimal” because of the company’s approach.
“We use all the data we have for a customer and allocate the overdraft proportion based on the customer’s activities, aiming for it not to be a burden to repay,” the CEO said.
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.”
In 2018, Kuda raised a $1.5 million pre-seed to launch its beta service in Nigeria. Last November, the startup secured another $10 million in seed funding (the highest in Africa) led by Target Global.
It later raised a $25 million Series A round in March this year to expand its credit offering. This latest Series B funding brings the total amount raised by the startup to about $91.5 million, shooting its valuation to $500 million.
Kuda is not the only African fintech startup that is raising funds. Over the last few months, other African fintech like Chipper Cash, Airtel Africa, Zeepay, and FairMoney have also raised impressive rounds to enhance their fintech offerings and expand to other markets.
Much of this fintech boom can be linked to the growing interest of Africans in financial services that are delivered digitally. The report says there are over 300 million unbanked people in Africa, and this figure presents an opportunity for fintech startups to come up with innovative offerings for the population.