By providing a remittance product to Nigerians living abroad, Kuda, a London-based startup that operates in Nigeria and challenges incumbents there with a mobile-first and personalized set of financial services, is moving to the U.K.
Since the digital bank’s debut in Nigeria in 2019, it has had some degree of success. In August of last year, Kuda announced a $55 million Series B investment in which it claimed to have up to 5 million users more than three times as many as it had then.
This year, Kuda plans to expand into other African nations including Ghana and Uganda. Although growth in those nations has not yet occurred, Kuda has chosen to begin in the United Kingdom rather, a decision the business claims is a part of a significant worldwide development drive.
Kuda’s decision to relocate to the UK is simple to administer. Babs Ogundeyi and Musty Mustapha launched the U.K.-based fintech business, which provides financial services to Africans (beginning with Nigerians) both inside and outside of Africa.
As a result, its affiliate, Kuda MFB Limited, facilitates the services offered to Nigerian users. The other company in charge of the recently announced services, Kuda EMI Limited, is in charge of remittances to Nigerians living in the United Kingdom.
The second is that it makes business sense. The biggest inbound remittance market in sub-Saharan Africa and one of the top 10 largest worldwide is Nigeria. By 2020, the remittance industry will be so large that it will contribute almost 4% of the nation’s GDP.
However, it is still quite costly to send money to Nigeria from countries like the U.S. and the U.K. For instance, sending money from the UK, which is the second-largest sender of remittances to Nigeria after the U.S., costs the sender 3.7% of the amount sent. Data estimates that the UK sends £3 billion to Nigeria each year.
Additionally, African consumer fintechs are competing on their own thanks to the fees they charge, the majority of which are commissions on transactions, even though international money transfer companies like WorldRemit and Remitly still control the majority of transactions in the U.K.-Nigeria corridor. Some of them are aggregator Zazuu, PayDay, Grey Finance, Lemonade Finance, Kyshi, NALA (U.K. to East African countries), and Lemonade Finance.
To that purpose, Kuda is utilizing an alternative strategy devoid of transaction costs. The fintech claims that it will enter the U.K. market with a £3 flat cost and a $10,000 transfer cap. According to Ogundeyi, Kuda anticipates that the majority of transactions made on its platform will cost between £350 and £500.
Kuda plans to eventually offer direct debits and local transfers to Nigerians in the U.K. in addition to remittances. According to the strategy, the Nigerian-born fintech believes it has the resources to compete with rival neobanks like Revolut, Monzo, and Wise because it has secured more than $90 million from investors like Peter Thiel’s Valar Ventures and Target Global.
It continues to remain to be discovered if remittance, the low-hanging fruit, will be adequate to generate long-term worth and if it has enough force of attraction to persuade users to use other services regularly.
These platforms have created sticky features that have produced strong adoption across different demographics in the U.K., along with migrants like Nigerians, the niche population Kuda is focusing on with its launch.
Kuda, like several other neobanks, will depend on a third party, typically a banking-as-a-service platform, to deliver these financial services, unlike its remittance product, which may have been designed in-house.
The platform in question for Kuda is called Modulr, an integrated payments platform for online merchants that provides a mobile wallet, digital and physical cards, local U.K. transfers, and direct debits.
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