What NOT to do as a Neobank!

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Today, as usual, we’ll take a look at some of the most exciting news crunches in Fintech, NFTs, the Metaverse, and beyond. I’ll also share some of the latest investment rounds and acquisitions of Fintech companies worldwide.

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There is a lot of excitement in the fintech space around neobanks (as always). These fintech startups have been intending to upend the traditional banking sector by offering digital-only products and services. The results so far have been varied and mixed with the majority of them struggling to make any monies.

Increasing these fintech's are also offerings insights on what NOT to do, this time we look at KudaBank in Nigeria…?

What’s new in Fintech?

PayQuicker launched Payouts OS, a new global Payouts as a Service platform that meets the needs of gig economy workers and SMEs across industries. Read more here.A week after announcing the release of Caixinhas (Money Boxes) to its entire customer base in Brazil, Nubank reached the mark of more than 1.7 million active customers who adopted the financial organization and planning feature.

Japanese Banks' Payment Clearing Network -- aka Zengin-Net -- is making its system for interbank money transfers available to operators of mobile payment services.

UK-based Paysend is launching Instant Account Payments which allows consumers and businesses to send instant cross-border payments up to a value of $100,000 to just $1 per payment.

What not to do as a Neobank

Kuda MFB, a neobank operating under the Nigerian microfinance bank license, has been recording losses for the past two years.

By the end of the 2021 financial year, the company recorded a loss of $14+ million. That's a 602% rise from the $2 million loss it made in 2020, according to a financial report. The financial report indicated that the company's revenue increased by 4,315% from 2020 to 2021. However, after every expense has been deducted, the company closed the year at a net loss, mostly due to the high credit loss/impairment charge and operating expenses.

The report said that the nonperforming loan recorded by the firm is too high for the comfort calculated at 63%. This drove the neobank to a high impairment rate. For context, loans are considered impaired when it's probable that the creditor will be unable to collect all interest and principal payments. The impairment eroded 96% of the interest income made from the loan offer. What this means is that Kuda extended a lot of bad credit through its overdraft product, which ate into its balance sheet.

Just a few days before it announced its $25 million Series A round in March 2021, Kuda started piloting its overdraft product with over 2,500 users who've been actively using Kuda. By June, the company claimed that the product had reached 50,000 users weekly. Kuda even claimed that at the end of the second quarter of 2021, they had disbursed $20 million in credit to over 200,000 qualified users, with a 30-day repayment period.?

Kudabank's overdraft feature was received with mixed feelings.?

Kuda's personnel expenses continued to increase by 500% as a result of its increasing employment of key management staff. Collectively, all of Kuda's operating expenses jumped by 652% in just one year.

But still, the neobank continued to hire high-ticket talents across the world. Just last month, it announced the hiring of Pavel Khristolubov, ex-COO of Moscow-based Tinker Bank, as COO, and Elena Lavezzi, ex-general manager at Revolut, as CSO.?

And in the same breath, Kuda laid off about 23 employees out of 450.

When Kuda launched, bank transfers on the app were free with zero card maintenance fee. While this is great for customer acquisition, the free-transfer model is heavily criticized.

“Banking isn’t free anywhere, and disruption doesn’t necessarily have to be free. What’s important is access, simplicity, and ease of use,” a financial analyst reportedly stated.

Kudabank said in its Series B announcement that it now has 1.5 million users. Kuda and its investors are likely playing the long game of growing their users, the long-term revenue generated from these customers is more valuable than the short-term costs or losses incurred.

However, breaking even might take longer than it projected until the company figures out how to monetize or improve on its existing offerings. Read the full story here.

? Quick Investment Rounds

Female-led fintech SageWealth secures €500,000 in pre-seed funding round for “ethically minded” millennials.

Fintech Pile.Capital concluded its recent pre-seed financing round, with a funding total volume of €2.8 million.

Kenyan embedded finance start-up Pezesha has raised $11 million in a pre-Series A funding round, a mix of $6 million in equity and $5 million in debt.

Nitra, Inc. , a fintech aiming to take on America's $4 trillion healthcare industry, has raised $62 million in seed funding.

?? Report of the Day

The Future of Money and Payments?

This report reviews the current U.S. system of money and payments, including developments in instant payments and stablecoins. It also describes design choices for the potential U.S. Central Bank Digital Currency in the context of public policy considerations related to building the future of money and payments, supporting U.S. global financial leadership, advancing financial inclusion and equity, and minimizing risks. Read the full report here.

? Before you go…

Crypto: Bahrain is finally taking steps to test bitcoin payment processing and payment solutions through OpenNode.?

Crypto: Mesh , a company offering emerging fintech real-time access to investment portfolios and hassle-free crypto transfers across exchanges, launches Front API on Product Hunt.

Metaverse: A virtual celebration for Saudi Arabia’s National Day was held on a Metaverse platform for the first time ever on September 23.

Metaverse: Puma announced the launch of "Black Station," a metaverse experience where PUMA Group users can connect and enjoy the brand's NFTs

?? And that brings us to the end of today’s Couchonomics Crunch.

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