Kudathe London-based Nigeria-based startup taking over incumbents in the country with a mobile-first and personalized suite of banking services is expanding into the UK by offering a remittance product to Nigerians in the diaspora.
The digital bank has seen some success since its launch in Nigeria in 2019. Kuda claims to have up to 5 million users, more than triple the number it had last August during its Series B round of $55 million, money it has raised. to enter other African countries. such as Ghana and Uganda this year. Expansion to those countries has yet to take place; instead, Kuda has opted to launch in the UK, a move the company says is part of a major global expansion drive.
From an administrative standpoint, Kuda’s move in the UK is simple. Founded by Babs Ogundeyi and Musty Mustapha, the startup is a UK-based fintech that provides financial services to Africans (starting with Nigerians) inside and outside Africa. As such, sservices to Nigerian users are facilitated through its subsidiary, Kuda MFB Limited. On the other hand, Kuda EMI Limited is the other subsidiary responsible for the newly launched services – including remittances – to Nigerians in the UK
Second, there is business acumen. Nigeria is the largest inbound remittance market in the Sahara and is among the top 10 largest globally. The remittances are so sizable that they will account for nearly 4% of the country’s GDP as of 2020. Still, sending money from places like the US and UK to Nigeria always remains expensive. For example, it costs the sender 3.7% of the amount sent to send money from the UK — the second largest sender of remittances to Nigeria, after the US, and an estimated £3 billion a year — to Nigeria, according to data.
And while international money transfer operators like WorldRemit and Remitly still control the lion’s share of transactions in the UK-Nigeria corridor, African consumer fintechs curb their own money through the fees they charge, most of which are commissions from transactions. Some include Gray Finance, PayDay, Lemonade Finance, Kyshi, NALA (UK to East African countries), and aggregator Zazuu.
“I don’t necessarily think it’s crowded as clearly there are still a lot of challenges in transferring money to Africa, especially to Nigeria, which is still expensive,” CEO Ogundeyi said when asked about Kuda’s moving to a relatively fraught money transfer space. “But for us it’s not just a money game. There is also a user experience, convenience and price factor.” To that end, Kuda opts for a different approach in which no transaction costs are charged. The fintech says yes Enter the UK market by setting a £3 flat fee with a £10,000 transfer limit. Kuda expects most of the trades to take place on his platform will fall between £350 and £500, Ogundeyi noted.
In addition to remittances, Kuda plans to provide direct debits and local transfers to Nigerians in the UK over time. The plan suggests the Nigerian-born fintech, which has raised more than $90 million from investors such as Peter Thiel’s Valar Ventures and Target Global, thinks it has enough firepower to take a small slice of the pie from other neobanks, such as Revolut, Monzo and Wise. These platforms have built sticky features that have seen strong adoption across a variety of UK demographics, including migrants such as Nigerians, the niche population that Kuda is targeting with its launch; therefore, it remains to be seen whether remittances, the low-hanging fruit, will be enough to generate long-term value and whether it will have enough appeal to entice customers to frequently use other services.
Unlike its remittance product, which may have been built in-house, Kuda, like many neobanks, will rely on a third party, usually a banking-as-a-service platform, to provide these financial services. The platform in question for Kuda is Modulr, an integrated payment platform for digital businesses to offer a mobile wallet, virtual and physical cards, local UK transfers and direct debits.
“Ultimately, Kuda is building a one-stop shop for Africans, including other services outside of money transfers. And our plan is not just for Africa, but for Africans everywhere,” Ogundeyi said of the expansion. “The UK is the first of the ‘outside Africa’ destinations. We plan to be in other African countries and expand remittance services to customers there and the diaspora market.”