Nigeria’s Kudi targets “digital bank” status on back of $5m funding

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Nigerian fintech startup Kudi is planning to transition into a full digital bank after raising a US$5 million Series A funding round to build out its agent network.

Founded by Yinka Adewale and Pelumi Aboluwarin in 2017, Kudi enables underbanked and unbanked Nigerians to access basic financial services such as money transfers, bill payments and cash withdrawals through its agent network.

Disrupt Africa reported yesterday the startup raised a US$5 million Series A funding round led by Partech Partners, which it will use to expand its team, grow its agent network, and launch new products. Adewale told Disrupt Africa the grand plan was to become a digital bank, but a large distribution network would be key to that.

“We will be providing our platform for mobile money and bank agents to have access to overdrafts, CRM tools and of course cash-in and cash-out transactions,” he said.

“On being a digital bank, the biggest challenge digital banks will face is distribution. That’s the first problem we are solving. Once we build a massively distributed network of agents, becoming a digital bank becomes easier. Hence our 12 months focus is to aggressively build out an efficient agent network.”

The rebundling of unbundled fintech offerings is increasingly becoming a trend, with Kudi following Nigerian fintech counterpart OneFi in raising funding in order to add more services. OneFi swiftly acquired payments startup Amplify, but the early signs are that Kudi plans to build out additional services itself.

The startup was initially launched as a chatbot to make online money transfers and bill payments easier, before Adewale and Aboluwarin realised there were bigger problems to solve.

“Our theory was that more people could have access to financial services if they could easily access it and understand how to use digital products. We thought it was a user experience problem as bank apps and web apps could get quite complicated for the average non-tech-savvy consumer,” said Adewale.

“In the process of building that, we realised we had a bigger issue. The demography we were building for, either didn’t have bank cards or were mostly earning money in cash. We then realised that while UX was a problem, for unbanked or underbanked consumers to use digital finance products, there has to be a form of gateway that makes it easy to convert cash to digital and digital back to cash.”

So the pair built it, and Kudi took off. It took part in Y Combinator in 2017, and raised a US$1.7 million seed round from investors including the US-based accelerator as well as Khosla Ventures, 4DX Ventures, Ventures Platform, Coinbase CEO Brian Armstrong and a few other angels. It now has over 4,500 businesses on its platform acting as agents, processing over US$30 million in payments monthly. This number is growing, and is set to increase even faster on the back of raising money.

Though Adewale did not rule out expanding to other African markets, he said Kudi’s plan for the next 12 months at least was to double down on Nigeria as there was room for more growth in the country.

“We think that there is a potential of over 200,000 monthly active agents in Nigeria and that the market is probably still around 30,000+ monthly active agents,” he said.

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Passionate about the vibrant tech startups scene in Africa, Tom can usually be found sniffing out the continent's most exciting new companies and entrepreneurs, funding rounds and any other developments within the growing ecosystem.

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