Africa fintech start-up funding is growing at a strong pace, 2020 saw a 49% rise in fintech funding. 2021's growth is on track to be even higher – Flutterwave’s massive US$170mn funding round, completed earlier this month, on its own exceeds last year’s total. In this note, we present brief profiles of the five African fintech start-ups that received the highest funding flows in 2020: Flutterwave, Bitfxt, Planet 42, Aella Credit, Kuda.
Nigeria is the clear leader in funding flows, and four out of the top five deals last year were there. We attribute this to Nigeria’s favourable demographics: a population that is large (206mn), youthful (18.4 years median age), underbanked (only 40% of adults have a bank account) and tech-savvy (mobile subscriptions are equivalent to 88% of the population).
Payments infrastructure is a sector that investors value highly. Flutterwave’s recent round made it the second fintech unicorn in Africa, after Interswitch; both are payment infrastructure providers. Globally, another notable example is Stripe, the Irish-American payment infrastructure company that has achieved a US$95bn valuation in its most recent funding round, making it one of the most valuable fintechs in the world.
Other African fintech start-ups that attracted strong investor interest in 2020 include ProfitShare Partners (South Africa, lending), Moneyfellows (Egypt, lending), YouVerify (Nigeria, anti-fraud), Paymob (Egypt, payments), VALR (South Africa, blockchain).
Top African fintech start-ups, based on the 2020 funding round
Source: Disrupt Africa
Flutterwave (Nigeria, payments, US$35mn)
Founded in 2016 and headquartered in San Francisco, Flutterwave is the latest addition to the fintech unicorn ranks, and is the second African fintech unicorn (after Nigeria’s Interswitch). Our proprietary fintech survey shows that unicorns are much more focused on raising funding than their smaller peers; this capital can be used to build technology, develop products, and acquire customers, all of which help to generate competitive advantage.
Flutterwave allows businesses to accept, in a secure environment, a wide variety of payment methods such as bank transfers, cards and mobile payments such as MPesa. It supports offline and online operations, from both domestic and international customers. It currently serves customers in 11 African countries, plus the UK and US. Over 100,000 individuals use its 'Barter' app. Individuals can also access short-term loans to help finance Flutterwave purchases. In Nigeria, the firm charges c1.4-3.8% of the transaction value as its fee. Existing customers include Uber, Booking.com and Jumia.
Flutterwave recently raised a whopping US$170mn in a Series C round from investors including Avenir Growth Capital, Tiger Global and Greycroft. In 2020, the firm raised US$35mn in a Series B round. Total investment now stands at US$225mn. Last year, it also announced a partnership with Worldpay FIS, for whom Flutterwave will be its payments provider in Africa. Flutterwave has additional partnerships with Alibaba and Visa.
Flutterwave business model
Source: Y Combinator
Bitfxt (Nigeria, blockchain, US$15mn)
Founded in 2016, Bitfxt is a Nigerian cryptocurrency firm. In February 2020, it raised US$15mn in a Series A funding round, including investment from the UK’s Payitup Clearinghouse. The investors also provided the firm with a US$125mn revolving margin facility, which can be used to allow traders to obtain leverage.
As well as running a cryptocurrency exchange for Ethereum and Bitcoin, Bitfxt has launched cryptocurrency-powered ATM cards and BoundlessPay, a wallet that allows users to make payments for a wide variety of services, using cryptocurrency as the payment medium.
The significant restrictions on converting naira into foreign currency are making Nigerians more receptive to alternative payment media, such as cryptocurrency. However, the Nigerian central bank is trying to reign in the growing popularity of this medium of exchange.
Bitfxt exchange platform
Planet 42 (South Africa, loans, US$12.4mn)
Launched in 2017, Planet 42 provides car financing to its customers, who are typically financially-excluded. It does this by buying second-hand vehicles on their customers' behalf and then leasing that vehicle back to the customer. Customers have the option to purchase the vehicle outright at any time, thereby finishing the loan.
By the end of 2020, Planet 42 had partnered with more than 350 dealerships in South Africa and purchased 3,000 cars on behalf of its customers. The company’s goal is to have purchased 100,000 cars in South Africa by 2024, with long-term plans to expand in Latin America and Southeast Asia.
The US$12.4mn raised in H2 20 brings the total volume of funding to US$20mn. Prominent investors include Change Ventures and Lendable.
Planet42 business model
Source: Company website
Aella Credit (Nigeria, loans, US$10mn)
In February 2020, Aella Credit raised US$10mn debt from Singapore’s HQ Financial Group. This is the firm’s second funding round; it had previously raised US$2mn seed funding at the US start-up programme, Y Combinator.
Founded in 2015, Aella Credit provides a range of digital retail financial services, including loans, investments, payments and insurance. It also has a blockchain arm, Creditcoin. It has operations in Africa (focused on Nigeria) and Southeast Asia (centred on the Philippines).
Aella Credit has provided over 1mn loans, and the number of monthly transactions stands at over 240mn. The firm uses pioneering facial recognition technology for customer authentication and credit scoring. Loans typically range from NGN1,500 to NGN1mn, with tenors of one to three months and interest rates of 4-30%. Approvals and disbursement take place within five minutes.
Aella Credit product portfolio
Source: Company website
Kuda (Nigeria, digital banking, US$10mn)
In November, Kuda Technologies raised US$10mn in its seed round, making it the largest such transaction in Africa. Key investors include Target Global, Entre Capital and SBI Investment. This comes on top of a pre-seed funding round of US$1.6mn in September 2019, supported by Startupbootcamp. A larger Series A funding round is in the works, according to Kuda’s CEO, Babs Ogundeyi.
Kuda gives its customers access to savings, lending and payments services from their mobile phones. Accounts can be opened within five minutes. It has a microfinance banking licence from the Central Bank of Nigeria, issued in June 2019.
Founded in 2016, the firm recently passed 1mn Android downloads, despite only beta-launching in Nigeria in September 2019. The company has over 250,000 customers and processes more than US$500mn transactions per month. Kuda prices its products competitively when compared to traditional banks (see below).
Kuda intends to expand from its Nigerian base to become a pan-African operation and will likely apply for banking licences in target markets. A small business banking proposition is also planned.
Kuda pricing comparison
Source: Company website