Nigerian Digital Banking Startup Kuda raises $1.6 million

Source: Kuda

Many startups are in the news these days. Now, a Nigerian fintech startup, Kuda, has raised around $1.6 million in a pre-seed funding round. However, the startup is a digital-only retail bank and it has launched a beta version of its online mobile platform.

Kuda is a licensed online bank. This has given the company an edge over other startups. The founder of the startup, Babs Ogundeyi, said, “We are proud of the fact that Kuda is a licensed bank. We have introduced our own brand new banking software. We also take deposits and connect to the switch directly.” Here Ogundeyi is referring to Nigeria’s Central Switch, a system that helps in bank settlements and communications.

A representative from the Nigeria Bank has also confirmed Kuda’s banking license. He stated, “There isn’t any bank, other than Kuda, that has obtained a micro-finance license.”

Now let us see what the startup offers. Kuda offers account checking without a monthly fee and a free debit card. The company also plans to give P2P payment options and consumer savings in the next few months. Ogundeyi stated, “You can open a bank account within five minutes. You can do all the KYC in the app and get a new bank account number.”

Ogundeyi is the co-founder of Kuda, along with former Stanbic Bank software developer Musty Mustapha. Previously, Ogundeyi worked as a financial advisor in the Nigerian government. The founders persuaded investor Haresh Aswani to lead the $1.6 million funding round. Ragnar Meitern and other angel investors have also participated in the round. Aswani has confirmed his investment and he will be a part of Kuda’s board.

Kuda plans to use the seed funds to transform from beta to live launch by the fourth quarter of 2019. The startup will also make tech for its banking platform. They will also get support from the development team in Cape Town and Lagos.

Ogundeyi wants to expand the company in the coming years. “Our services are only limited to Nigeria right now. However, we plan to make a Pan-African digital-only bank,” he said.

According to the 2014 census, Nigeria is Africa’s most populous country and the largest economy. Therefore, to keep up with the increasing population, Kuda has relationships with Nigeria’s biggest institutions. These are Access Bank, GTBank, and Zenith Bank.

Kuda’s CEO has made it clear that the banks are just partners, not investors. Customers can also use these banks’ ATMs and branches to put money or withdraw it without a fee. Ogundeyi claimed, “We don’t have a single branch in Nigeria, however, we have the largest branch network in the whole country.”

The startup is also planning to generate revenue by focusing on the leverage of bank balances. Ogundeyi stated, “We want to match different liability classes to different asset classes. This is how we make money and generate efficient income.”

In Nigeria, Kuda has entered a revenue-generating market. However, it is already a crowded fintech field. Nigeria has now become a base of tech investments and payment startups in Africa.

According to the joint McKinsey Company and Gates Foundation analysis, Nigeria has become slow in converting to online payments than other African countries, like Kenya. The study also made it clear that there would be a $1.3 billion revenue if Nigeria has the same digital market penetration as Kenya.

Many startups are going after this prize in the country. Moreover, many of these startups have the mentality of expanding in Nigeria first before the continent and global expansion.

Nigerian payments company Paystack raised $8 million in 2018 to expand customer base. The company also has plans to expand its business globally.

Ogundeyi has a futuristic approach. “We want to be the next generation’s bank where a person can do everything, like payments, savings, and transfer and the one that’s the least expensive.”

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