Nigeria-based digital bank FairMoney has entered discussions to buy Umba , another Nigeria-based digital bank Umba, in a USD 20 million all-stock deal. The acquisition negotiations are still in their early stages, and the move signals FairMoney’s interest in growing its customer base by expanding into more countries, specifically Kenya, where Umba has operations.

It also underscores the challenges facing fintechs in Africa amid a challenging market for startups globally: a USD 20 million all-share is almost equivalent to the amount Umba raised from outside investors. Umba, founded in 2018, was launched as a credit-led digital bank targeting emerging markets. It provides banking services such as loans, current accounts, savings accounts, fixed deposit accounts and bill payments to customers in Nigeria and Kenya.

Reasons for the acquisition FairMoney, known for its lending services in Nigeria, has been looking for more avenues for expansion. In 2020, the company entered India as its second market and has also been expanding its product range. The bank’s app originally launched as a digital lender in Nigeria in 2018.

Since then, it has added other financial services, such as debit cards, transfers, and payments. The potential acquisition points to FairMoney’s interest in Umba’s microfinance license, obtained in 2022 through acquiring a majority shareholding in Daraja Microfinance Bank. This license allows Umba to offer banking services in Kenya.

Obtaining a microfinance bank license in Kenya can be challenging. Unlike Nigeria, which has over 600 microfinance bank licenses, Kenya has only 14. For FairMoney, acquiring Umba could streamline entry into Kenya, bypassing the lengthy licensing process that took Umba three years.

Previous news from FairMoney In March 2023, FairMoney has acquired PayForce in a deal worth between USD 15-20 million, a merchant payment service under CrowdForce. With this acquisition, FairMoney aimed to expand its financial services to merchants. The digital bank, initially focused on retail customers, has diversified its offerings, including debit accounts, cards, and P2P transfers.

On the other hand, PayForce offers agency banking services to over 10,000 businesses, including POS devices and various financial tools. In September 2022, FairMoney has partnered with Oradian, a cloud-based core banking system. Oradian serves over 10 million customers across 13 countries, offering tailored solutions for developing markets.

The Nigerian digital bank chose Oradian for its ability to address market challenges, support credit assessment, and drive product innovation, leveraging Oradian's 'plug and play' solution with minimal backend investment. In July 2021, FairMoney, has raised a USD 42 million Series B round led by Tiger Global Management to expand its services and become a financial hub for users. This follows previous funding rounds of EUR 10 million Series A in 2019 and EUR 1.2 million seed in 2018.

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