As an African living in Europe, sending money to my country of birth (which is ever so often) can be a nightmare because of the transaction fees from traditional banks. The usually 48-72hours wait time. Neobanks are good at solving this. The neobanks so readily available in Europe are lacking back there. I have spoken to a couple of founders who have great ideas for neobanks and are still trying to get them off the ground. So when I came across Kladot, already with some traction, launched in 2022 and have seen so remarkable growth with users. I decided to invest via the Tekedia Angel syndicate. Here are some reasons why I did.
As an African living in Europe, I consider their product a great fit for the market segment they are addressing (immigrants/expatriate communities). Kladot has a product that allows immigrants/expatriates to send and receive funds, and move money around the world in 3 clicks and in just seconds.
It’s a far cry from the 48-72-hour transfer time for traditional banks for funds as little as 100 dollars or less. They give access to multiple currencies with family and friends rotational group savings, access to payments, and micro-loans. An interesting attribute of the immigrant communities where saving and access to loans is very attractive. Thier virtual cards speak to the challenge of fraud which is very common with online transactions. They understand how to serve the first-generation immigrants who work in the USA/Europe and still support their loved ones and do business in their country of birth. Give them options, make it convenient, digital and fast.
Their products include B2B, B2C and B2B2C digital banking services for migrants and minority communities. Kladot’s platform offers SMEs and Startups the ability to offer neobanking services via their API is a massive plus. An interesting foray into the BaaS ( banking as a Service ) world! This lineup of B2B and B2B2C clients could be a great revenue source with higher margins. While many Fintechs offer similar services, few offer a B2B2C package which empowers businesses (fintech, platforms, etc) also to offer banking services to their end users. This has carved out a line of top-tier clients and partners for Kladot. They have signed up for one of the largest deals in the global fintech arena in Africa.
A great consideration for me was the market; both the addressable and serviceable markets are huge with very few challengers in the immigrant space. In 2020, the total number of African migrants living in Europe was put at 40.6 million. This number is likely to have increased post-Covid. While 2.1 million Sub-Saharan African immigrants resided in the United States in 2019, representing 5 per cent of the total US population. These migrants, especially those from sub-Saharan Africa, are better educated, participate in the labour force at higher rates, and are more likely to speak English at home. They have higher earning power than the average immigrants making them a solid serviceable market inclined to send funds back to their country of birth.
Kladot is positioning itself in an attractive sector. Fintech is the fastest-growing start-up industry in Africa. Fueled by urbanization, internet and smartphone penetration with a massive youthful population. The trends are in its favour, just similar to the takeoff of the telecommunication sector in the early 2000s. E-payments in Africa have been gaining momentum since 2000 with mobile-money transaction, digital wallets leading the way.
- Payment gateways like Paystack, Yoco, PayFast, PayStack, Zapper, Flutterwave flourishing
- Payment Solutions like Nomba formerly Kudi growth evident with their just announced pre-Series B investment.
The Neobanking segment in Africa is projected to grow by 22.62% (2023-2027) resulting in a market volume of US$30.97bn in 2027. In the Neobanking segment, the number of users is expected to amount to 4.49m users by 2027. User penetration will be 0.2% in 2023 and is expected to hit 0.3% by 2027.
In summary, accessing a deal for Angel Investing comes with its own inherent risk. While the market and product for me are very highly ranked, I understand that alternatives and possible competitors are getting into the market so it can be early days. Taking a cue from the crypto market in Africa regulation in emerging markets can be very volatile. Finally, raising funds with the ZIRP has made raising funds from US investors tough. As I insinuated in my last article, the ability to raise funds to ensure sustenance is key irrespective of the great traction.