Umba, a digital banking platform operating in Lagos, Nigeria, has raised $15 million in Series A funding. The news comes almost two years since the fintech raised a seed round of $2 million.
The funding came from a couple of Nubank executives. Other investors include Tom Blomfield, the co-founder of Monzo, and previous backers Lachy Groom and ACT Ventures. New investors such as Lux Capital, Palm Drive Capital, Banana Capital and Streamlined Ventures participated, while VC firm Costanoa Ventures led the round. The fintech has raised a total of $17.5 million to date.
“The Nubank guys saw what we’re doing and recognized it is the right model for emerging markets. Credit is the hardest problem to solve and to underwrite customers at scale in multiple markets is challenging. It took us 18 months to build that. But now it’s up and running and performing,” said CEO, Tiernan Kennedy.
The new funding will allow the company to test this out as it prepares to launch in new markets, including Egypt, Ghana and Kenya, where mobile money is prominent.
Why The Investors Invested
Umba has been operating for around two years. When asked for financial information, Kennedy declined to provide specific figures, only stating that the company has doubled its revenue every three months since launching 18 months ago with over 1 million Google Play Store installs.
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The startup’s founding team also greatly inspired the investment. Prior to joining Umba, Kennedy served as CTO of PearUp, a dating service, and as head of engineering at IoT business Canary. On the other side, CFO Barry O’Mahony was previously the chief of operations of Tola Mobile, a UK fintech with operations in Uganda, Rwanda, Mozambique, Tanzania, and Kenya.
A Look At What The Startup Does
Umba, founded in 2018, says it provides a diverse range of transparent and accessible financial products to consumers in Africa who are underserved by legacy banks — only 43% of the region’s population has an account with a financial institution.
It offers free bank accounts, interbank transfers, peer-to-peer transfers, and bill payment services. These are basic aspects of African digital banks, whether they are deposit-oriented like Kuda, credit-oriented like FairMoney or Carbon, or a hybrid like Fintech Farm.
Tiernan Kennedy, the company’s CEO, explained that Umba follows the credit-led strategy pioneered by Nubank, in which it initially addresses customers’ liquidity needs before upselling them on a broad range of banking products.
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Thus, Umba users can obtain loans in addition to obtaining a no-fee current account, free payments, and bill payments. Kennedy stated that the company offers credit solutions based on private data supplied by customers. The fintech startup earns the majority of its revenue by charging users a monthly interest rate of 10%.
“I’d like to think that we’re the cheapest in the market. The reason is we’re collecting data, making automated underwriting and retraining models every month based on customer performance to deliver credit in seconds,” said Kennedy. “Also, we’re best in class in terms of lending, which allows us to offer the lowest interest rates in the markets.”
Kennedy noted that the firm’s emphasis on engineering and customer experience had contributed significantly to its growth. Additionally, he stated that they would play a critical role in Umba’s quest to serve numerous markets, currencies, and payment infrastructures.
“Typically, like a legacy bank, some startups will buy off-the-shelf banking systems and customize them for their customers. But they’re not thinking about the customer first. For us, we designed core banking systems from the ground up and can deliver a customized experience for the customer at the drop of a hat in both banking and mobile money markets,” said the chief executive.
“We can take in all that open banking data and underwrite at scale with these different fragmented payment types and data types. What that means for us, in practice, is that we’re multi-currency, we can go multi-country, we can do all different payment types. And that takes time. But then when you get your ability to move extremely fast against competitors.”
The founders emphasized that they had made several crucial recruits for Umba’s new phase of regional expansion, including the former Chief Financial Officer of Interswitch and senior Zynga workers.
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Umba will also expand its product offering over the next 18 months, adding debit cards, savings accounts, and stock trading.
“Right now, we’ve solved for credits and spending; what’s next is savings and investments, creating new markets opening up, that means hiring up staff in our three new markets,” added Kennedy.
Umba Digital banking Umba Digital banking
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert.
As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard. You can book a session and speak with him using the link: https://insightsbyexperts.com/view_expert/charles-rapulu-udoh