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.

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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

Nigerian digital banking startup, Kuda, has a new competitor on the market, the Irish founded fintech startup Umba, which has announced that it has raised $2 million in seed funding round from new investors including Lachy Groom, ex-Head of Issuing at Stripe; Ludlow Ventures; Frontline Ventures and Act Venture Capital. Umba plans to use the investment to enter its second market, Nigeria, as well as continue to grow its team of passionate people from all over the world.

“When we started Umba we set out to provide an essential service for the millions of people who are not getting the banking services they need,” says –Tiernan Kennedy, CEO at Umba in a press release “With this latest investment, we can accelerate our progress and get our product into the hands of more customers.”

Why The Investors Invested

On why the VC invested, Ludlow Ventures partner Brett deMarrais said 

“Umba is the first investment we’ve made in the African market and it’s one we were excited to participate in. The team at Umba have an excellent service that drives down the cost of banking for their customers and democratizes access. The move away from physical branch infrastructure was already underway and it has accelerated this year. It’s clear the African market is maturing and that we’re entering a very interesting phase.”

Investment in UMBA is not a surprise. 2020 remains the best year so far for startups within the African fintech ecosystem. Recently, payments company Stripe, acquiredNigerian payment service startup Paystack in a deal reported to be more than $200 million. Apart from Paystack’s acquisition, DPO Group was also acquired for $288 million; and Sendwave for $500 million. This shows a booming ecosystem shattering records in venture financing rounds as well as acquisitions.

Umba African startup Umba African startup

Read also: Nigerian Fintech Startup OnePipe Secures $950k In Pre-seed Round

A Look At What Umba Does

Founded in 2018 by Tiernan Kennedy, and currently operating in Kenya and Nigeria, Umba offers a digital financial service alternative to legacy African banks. Its mobile app gives customers a free checking account, free instant peer-to-peer money transfers, lending, deposits, BillPay and cash back. This is in contrast to the generally high-cost barriers found among traditional banking institutions in African countries.

“From the outset we built our platform to serve multiple markets, currencies and payment infrastructures,” Umba’s CEO Tiernan Kennedy said. “This flexibility is an extremely important consideration as it’s much harder to upgrade your systems at a later date. For example, bank and debit card penetration is high in Nigeria, so Umba is deeply integrated into those payment methods, while across Kenya and East Africa mobile money is dominant so our platform is tightly integrated with those services, too.”

Umba competes with Kuda, Carbon, Eversend and “Chip or cash” methods.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer