Fintech Farm secures $ 7.4 million to launch neobanks in Nigeria and other emerging markets – TechCrunch

Fintech Farm, a newly has launched a UK-based fintech start-up that builds digital banks in emerging markets, confirmed to TechCrunch today that it has raised $ 7.4 million in seed funding.

The seed round was run by Flyer One Ventures and Solid. TA Ventures, Jiji, and AVentures Capital also participated. The company said it plans to use the investment to launch neobanks in eight countries over the next 24 months..

Digital banks, neobanks, challenger banks, or whatever you call them, are one of the main recipients of venture capital investments in fintech.. Globally, hundreds of people have sprung up in recent years trying to challenge incumbents in their respective markets.

In Eastern Europe, for example, the Ukrainian neobank Monobank, in just a few years of activity, has amassed more than 4.5 million customers and more than $ 100 million in revenue, as the company claimed. Last year. After having contributed to the development of Monobank in Europe, Dmytro Dubilet, one of its co-founders, aims to do the same in emerging markets through his new company.

He started Fintech Farm with Nick Bezkrovnyy, former director of KPMG UK, where he led mergers and acquisitions in global fintech, and Middleware founder Alexander Vityaz..

In November 2021, Fintech Farm conquered its first market, Azerbaijan, by taking a credit-focused neobanking approach and providing loans to customers with poor credit histories through cards and a mobile app.

During a call with TechCrunch, Dubilet said that the operating model of Fintech Farm, in Azerbaijan and in future markets, is to launch its app through partnerships with local banks.

“Usually it’s a 50-50 partnership with a local bank,” he said when asked how the partnership worked.. According to him, Fintech Farm is responsible for the business side of things – the application and processes of credit decision making. The partner bank, with its local knowledge, holds the license and the capital because the two parties co-invest in the company also.

As a UK-based fintech, Fintech Farm takes a somewhat different approach to the conventional model in the country and Europe, where neobanks (Monzo, Starling Bank, Revolut) prefer to have their own banking license and offer their own. range of financial services. .

But given its operational approach of providing financial services to emerging markets, it makes sense to have a different business model. Fintech Farm uses a different name in each country it goes into, but the same design and mascot – a funny lion with a lilac mane..

Two months after its launch in Azerbaijan under the name Leobank, Fintech Farm has issued more than 100,000 cards; by the end of the year, he hopes to increase that number to one million.

And over the next two years, Fintech Farm plans to enter eight emerging markets spread across Africa and Asia, the first of which is Nigeria..

“We intend to launch similar activities in approximately eight other markets which are slightly bigger than Azerbaijan of course, ”Dubilet said. “Actually our next market will be Nigeria, we’ve visited Nigeria a few times already and it’s one of our favorite countries,” Dubilet said, adding that the launch will likely take place in the first quarter of 2022.

Meanwhile, despite the company’s initial plan to partner with a bank in every country it grows, Fintech Farm has so far done the opposite in Nigeria. At present, the company has obtained its own microfinance banking license – licensed to most fintechs in the country. are required to have. The founders said that once Fintech Farm reaches 200,000 customers, it will partner with a bank to expand further. According to Bezkrovnyy, a determining factor in choosing a partner bank, besides licensing and infrastructural support, will be how quickly it can move to capture millions of customers and issue hundreds of millions (dollars) in loans.

Fintech Farm’s key product is a card that works like a debit card where users can withdraw funds from deposits and a credit card where a loan facility is attached to the customer’s name. A savings account, deposits and transfers are some of the features of the app.

The Nigerian people are thirsty for credit, and Fintech Farm’s credit-driven approach will serve to meet the demand (most of its income comes from the supply of loans) from companies such as FairMoney and Carbon for years. yetunlike these native neobanks, Fintech Farm wants to use credit cards to provide cheaper and more accessible credit.

In terms of the credit product, we see an opportunity for a ‘mass credit card’ in Nigeria. Currently, credit cards issued by traditional banks are limited to the upper middle class ”, Bezkrovnyy said in a statement. “At the same time, the APRs of credit offers from neobanks and alternative lenders may well be above 100%. We will fill this gap and accept these customers abandoned by traditional banks and offer them fair interest rates.. “

The West African nation, unlike most developed countries, does not have an advanced credit bureau system for detailing people’s credit histories, so there is some skepticism as to how Fintech Farm will use. credit cards to operate. But Dubilet is pretty confident, he cites the company’s data science teams he describes as “one of the best in the world” to work magic..

As part of this round table, Vladimir Mnogoletniy, co-founder of Genesis, the parent company of the African online classifieds platform Jiji, will join the board of directors of Fintech Farm. He is also a partner of the lead co-investor Flyer One.

The founders of Fintech Farm believe that the expertise and understanding of Mnogoletniy and his team will be essential to the growth of their business.

In a statement, Mnogoletniy said that Jiji, having built one of the largest e-commerce platforms on a GMV basis, was looking for the right partner to enter the neobank and that investing in Fintech Farm was a strategic investment for this purpose. .

While Fintech Farm is using the investment to carry out its expansion plans, it also intends to spend heavily on marketing and recruiting talent, especially engineers and data scientists.

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