Pascal Oparada
The fintech industry in Nigeria is coming of age. A digital-only bank has gone into operations in Nigeria. Kuda is Nigeria’s fully licensed digital bank, which began operations in 2018 in Lagos, Nigeria and London, the United Kingdom.
The bank will go live this year.
The bank offers full banking operations and partners with three of the biggest banks in Nigeria, GTBank, Access Bank and Zenith bank.
Kuda is a digital-only retail bank. The bank recently raised $1.6 million in venture capital pre-seeding in September.
It is based in Lagos, Nigeria and London, the United Kingdom. It recently launched the beta version of its online mobile finance platform. Kuda is fully licensed by the Central Bank of Nigeria, which gave it a distinction compared to other fintech startups.
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“We have built our own full-stack banking software from scratch. We can also take deposits and connect directly to the switch,” Founder, Babs Ogundeyi, said.
He also said that Kuda is connected to Nigeria’s Central Switch, a system that facilitates bank communications and settlements.
The spokesman for the Central Bank of Nigeria confirmed Kuda’s banking licence and status.
“As far as I am aware there is no other digital bank in Nigeria that has a micro-finance licence,” he said.
Kuda offers checking accounts with no monthly fees, a free debit card, and plans to offer consumer savings and Peer-to-Peer (P2P) payments options on its platform in coming months.
“You can open a bank account within five minutes, do all the Know Your Customer (KYC) in the app, and you get issued a new bank account number,” Ogundeyi said.
Ogundeyi is a repeat founder who exited classifieds site, Motortradertrader.ng and worked in finance advisory role to the Nigerian government. He co-founded Kuda in 2018 with former Stanbic Bank software developer, Musty Mustapha.
Kuda plans to use its seed funds to go from beta to live launch in Nigeria by fourth-quarter of 2019. The startup will also build out the tech of its banking platform, including support for its developer team located in Lagos and Cape Town, according to Ogundeyi.
It also intends to expand in the near future. “It’s Nigeria for now, but the plan is to build a Pan-African digital-only bank,” he said.
As of 2014, Nigeria has held the dual distinction as Africa’s largest economy and most populous country (with 200 million people).
To scale here, and add some physical infrastructure to its online model, Kuda has correspondent relationships with three of Nigeria’s largest financial institutions: GTBank, Access Bank and Zenith Bank.
He clarified the banks are partners and not investors. Kuda customers can use these banks’ branches and ATMs to put money into bank accounts or withdraw funds without a fee.
“Even though we don’t own a single branch, we actually have the largest branch network in the country,” Ogundeyi claimed.
Kuda’s plans to generate revenues focus largely around leveraging its bank balances. “We plan to match different liability classes to the different asset classes that we create. That’s how we make money, that’s how we get efficiency in terms of income,” Ogundeyi said.
In Nigeria, Kuda enters a potentially revenue-rich market, but its one that already hosts a crowded fintech field, as the country becomes ground for payments startups and tech investment in Africa.
In both raw and per capita numbers, Nigeria has been slower to convert to digital payments than leading African countries, such as Kenya, according to joint McKinsey Company and Gates Foundation analysis done several years ago. The study estimated there could be nearly $1.3 billion in revenue up for grabs if Nigeria could reach the same digital-payments penetration as Kenya.
A number of startups are going after that prize in Nigeria with a strategy to scale in Nigeria first before expanding outward on the continent and globally.
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San Francisco-based, no-fee payment venture Chipper Cash entered Nigeria this month.
Series B-stage Nigerian payments company Paga raised $10 million in 2018 to further grow its customer base (that now tallies 13 million) and expand to Asia and Latin America.
Ogundeyi believes the startup can scale and compete in Nigeria on a number of factors, one being financial safety. He names the company’s official bank status and the Nigeria Deposit Insurance Corporation security that brings as something that can attract cash-comfortable bank clients to digital finance.
Ogundeyi also points to offerings and price. ”We look to be the next generation bank where you can do everything, savings, payments and transfers, and also the one that’s least expensive,” he said
