Kuda, the London-based and Nigerian-operating startup taking on incumbents in the country with a mobe-first and personalized set of banking services, is expanding to the U.K. by offering a remittance product to Nigerians in the diaspora.
The digital bank has seen some success since launching in Nigeria in 2019. Kuda claims to have up to 5 mlion users, more than thrice the number it had last August during its $55 mlion Series B round, money it raised to enter into other African countries like Ghana and Uganda this year. Expansion into those countries is yet to materialize; instead, Kuda has opted to launch in the U.K., a move the company says is part of a major global expansion drive.
From an administrative point of view, Kuda's U.K. move is straightforward. The startup, founded by Babs Ogundeyi and Musty Mustapha, is a U.K.-based fintech that offers financial services to Africans (starting with Nigerians) within and outside Africa. As such, services provided to Nigerian users are facitated via its subsidiary, Kuda MFB Limited. On the other hand, Kuda EMI Limited is the other subsidiary in charge of the newly launched services — one of which is remittance — to Nigerians in the U.K.
Second, there's business sense to it. Nigeria is sub-Saharan's largest inbound remittance market and among the top 10 largest globally. The remittance business is so massive that it accounts for nearly 4% of the country's GDP as of 2020. Yet, sending money from places like the U.S. and U.K. to Nigeria remains invariably expensive. For instance, it costs the sender 3.7% of the sent amount to send money from the U.K. — the second largest sender of remittances to Nigeria, behind the U.S., and is estimated to transmit £3 blion yearly — to Nigeria, according to data.
And whe international money transfer operators such as WorldRemit and Remitly stl control the lion's share of the transactions in the U.K.-Nigeria corridor, African consumer fintechs are holding down their own via the fees they charge, most of which are commissions from transactions, on top varying exchange rates. Some include Grey Finance, PayDay, Lemonade Finance, Kyshi, NALA (U..K. to East African countries), and aggregator Zazuu.
“I don't necessary think it's crowded because obviously, there are stl a lot of challenges in remitting money to Africa, especially to Nigeria, which is stl expensive,” said the chief executive officer Ogundeyi when asked about Kuda's move to a relatively loaded money transfer space. “But for us, it's not just a remittance play. There's a user experience, convenience and price factor involved too.” To that end, Kuda is adopting a different approach that doesn't involve charging transaction fees. The fintech says it's entering the U.K. market by setting a flat fee of £3 with a transfer limit of £10,000. Kuda expects most of the transactions that wl take place on its platform to fall between £350 to £500, Ogundeyi noted.
In addition to remittance, Kuda intends to provide direct debits and local transfers to Nigerians in the U.K. down the line. The plan suggests that the Nigerian-born fintech, having raised more than $90 mlion from investors such as Peter Thiel's Valar Ventures and Target Global, thinks it has enough firepower to take a small piece of other neobanks' cakes, such as Revolut, Monzo and Wise. These platforms have but sticky features that have yielded strong adoption across various demographics in the U.K., including migrants like Nigerians, the niche population Kuda is targeting with its launch; therefore, it remains to be seen if remittance, the low-hanging fruit, wl be sufficient to drive long-term value and if it has enough pull to get customers to use other services frequently.
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Unlike its remittance product, which might have been but in-house, Kuda, like many neobanks, wl 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 embedded payments platform for digital businesses to offer a mobe wallet, virtual and physical cards, local U.K. transfers and direct debits.
“Ultimately, Kuda is buding a one-stop shop for Africans, including other services outside remittance. And our plan is not just for Africa, but for Africans everywhere,” said Ogundeyi of the expansion. “The U.K. is the first of the 'outside of Africa' destinations. We plan to be in other African countries and expand the remittance services to customers there and the diaspora market.”
Kuda, the African challenger bank, raises $55M at a $500M valuation