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Fintech - November 9, 2022

Kuda Bank Expands to the UK: 2 Big Takeaways

Kuda, a fintech startup operating in Nigeria but based in London, is set to expand to the U.K by providing a remittance product to Nigerians living abroad. 

This is a  move that Kuda describe as a major global expansion drive as it stalls its previous plans to expand to Ghana and Uganda.

Babs Ogundeyi and Musty Mustapha founded the U.K.-based fintech startup, which provides financial services to Africans, starting with Nigerians both inside and outside of Africa.

Kuda MFB Limited, a subsidiary of the startup, facilitates the services offered to Nigerian users. Kuda EMI Limited, which is another subsidiary, is in charge of the recently introduced services, including remittance, for Nigerians living in the United Kingdom.


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Solving the remittance problem

Nigeria remains one of the largest inbound remittance markets in sub-Saharan Africa and one of the top 10 largest globally. The remittance industry is extremely massive and it contributed to almost 4% of the nation’s GDP in 2020.

However, transmitting cash from countries like the US and the UK to Nigeria still remains expensive.

For instance, sending money from the UK costs the sender 3.7% of the total amount sent. It is estimated that the UK accounts for $3,425 billion remittances to Nigeria annually, ranking second to the United States in remittances.

However, the majority of transactions between the UK-Nigeria are still controlled by international money transfer companies like WorldRemit and Remitly.

Similar to this, African consumer fintechs are succeeding by charging fees—the majority of which are commissions on transactions—on top of fluctuating exchange rates.

Some includes PayDay, Grey Finance, Lemonade Finance, Kyshi, and Lemonade Finance.

“There are still a lot of challenges in remitting money to Africa, especially to Nigeria, which is still expensive…But for us, it’s not just a remittance play. There’s a user experience, convenience and price factor involved too,”  said the chief executive officer Ogundeyi when asked about Kuda’s move to a relatively loaded money transfer space. 

In order to do this, Kuda is using an alternative strategy that does not include imposing transaction fees. 

The fintech claims that it will enter the UK market with a $3.43 flat cost and a $10,000 transfer cap. Kuda anticipates that most transactions made on its platform will be in the range of $399 and $570.

Providing direct debits and local transfers

Kuda plans to expand also includes offering local transfers and direct debits to Nigerians in the UK.

Kuda, like many neobanks, will rely 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 aiding Kuda to achieve this is Modulr, an embedded payments platform for online merchants that provides a mobile wallet, digital and physical cards, local UK transfers, and direct debits.

“Ultimately, Kuda is building 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 UK 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.”

A backdrop on Kuda’s funding

Since the digital bank’s debut in Nigeria in 2019, it has had some degree of success. The platform claims to have 5 million users, which is over three times as many users as it had in August of last year when it closed its $55 million Series B investment.

The platform raised the funds necessary to enter other African nations this year. However, expansion into such countries are yet to happen. Kuda has chosen to expand to the UK instead.

The Nigerian-born fintech believes it has the resources to advance its plans for remittances and to compete in some modest way with other neobanks like Revolut, Monzo, and Wise after raising more than $90 million from backers like Peter Thiel’s Valar Ventures and Target Global.


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