Access to banking services is very important for the growth of the Nigerian economy. Yet there is still no easy access to brick-and-mortar banks. As smartphone adoption spreads, a solution to this problem has emerged: mobile banking.
Mobile banking beneficial for both consumers and banks
Mobile banking as a sector is focused on offering banking services through mobile apps instead of traditional bank branches. It is easy and convenient since the widespread adoption of mobile devices means that most people regularly use a smartphone or a tablet. However, monetary transactions through mobile devices are not unique to the banking industry. In the entertainment sector, for example, online casinos have long required customers to set up accounts with banking details in order to deposit money as well as claim the best online casino bonuses. Many of the most popular providers nowadays offer a chance to play on mobile – either on an optimized mobile site or a tailored mobile casino app. This means that many of these deposits are processed on a mobile app. That is why offering easy and secure payments is one of the factors that is taken into account by sites reviewing online casinos.
There are also online retail apps or delivery apps that require users to fill in their banking details to process payments. But while processing financial transactions via mobile apps is not entirely new, mobile banking has recently transformed into a standalone industry. According to a 2018 report, Nigeria had only 38 million citizens who had access to financial services. That figure is out of a population of over 195 million. Still, that year 11 banks saw N124.5bn in revenue from electronic transactions, which meant a rise of 43% from N86.72bn in 2017. This demonstrates that there is a lucrative market for banks interested in streamlining digital financial services for their clients. App-based banking can become a big driver for further growth in that area.
Nigerian mobile banking start-up Kuda raises $10 million
Nigeria seems to be doing great in terms of leading the region in mobile banking adoption. According to a report published on techcrunch.com on 10 November 2020, Kuda, a Nigerian start-up that is active in mobile banking, managed to raise $10 million in seed funding. Kuda is the company behind Africa’s first mobile-first challenger bank. This means that its approach is to start from the mobile version of its services and grow from there, while it is placed to challenge bigger established banks. Its CEO is Babs Ogundeyi and he aspires to transform his Nigeria-based enterprise into a bank for everyone across Africa and the African diaspora. As techcrunch reports, Kuda started out in September 2019 and has since amassed 300,000 customers, processing transactions valued at more than $500 million on an average monthly basis.
If Kuda’s performance is any indication for the future of mobile banking, it promises to be stellar. The $10 million it raised broke the record in terms of seed rounds in Africa. Its ambitious plan was backed by European venture capital firm Target Global, while SBI Investment and Entrée Capital were also part of the funding plan. The project also received support from individual and angel investors. The list includes names that had founded or invested in popular and successful app-based banking and fintech services such as Revolut, Nubank, Stash, and Auxmoney. The fact that such notable people in the sector decided to back Kuda is evidence of its immense potential.
The ambitious start-up is not the only success story of the industry in Nigeria. Earlier in 2020, Stripe announced it would acquire Paystack, a Nigerian payments start-up. The deal was the biggest acquisition by Stripe and the largest acquisition of any Nigeria-based start-up. Interswitch has also made a name for itself after it received an investment from Visa and managed to snatch a valuation of $1 billion in 2019. Based in Lagos, Interswitch is active in digital payments and commerce, focusing on African markets.
With so much movement across app-based banking services providers, it is safe to say that there will soon be more options for the average Nigerian consumer when it comes to choosing a bank. Nigerian start-ups are full of potential and vision, so we can’t wait to see what they do next.