The startup that creates digital banks in emerging markets has raised $7.4 million in seed funding.
The investment will be used to launch neobanks in eight countries over the next 24 months. The seed round was led by Flyer One and Solid. U.ventures, AVentures Capital, and Jiji also participated.
Digital banks, neobanks, challenger banks, and whatever you call them, are among the biggest recipients of VC investments. Over the past few years, hundreds have sprung forth to challenge incumbents in their markets.
In Eastern Europe, Ukrainian neobank Monobank has amassed over 4.5 million customers and more than $100 million in operating income in just the years of operations. Dmytro Dubilet, one of the co-founders of Monobank, wants to help scale the company in emerging markets.
He started Fintech Farm with Nick Bezkrovnyy, a former director at KPMG U.K., and Middleware founder Alexander Vityaz.
The first market of Fintech Farm was in Azerbaijan. It took a credit-led neobank approach by providing loans to customers with thin credit histories via cards and a mobile app.
Dubilet said on the call that the app would be launched via partnerships with local banks.
He remarked that it is usually 50% partnership with a local bank. He said that the app and credit decision making processes are done by the Fintech Farm. The partner bank holds local knowledge, license and capital as both parties co- invest in the business equally.
neobanks in Europe prefer to hold their banking license and offer their range of financial services, whereas U.K.-based Fintech Farm uses a different approach.
It makes sense to have a different business model considering that it provides financial services to emerging markets. The mascot and design of the farm are the same as in each country, but with a different name.
By the end of the year, it hopes to have a million cards, after issuing over 100,000 in three months.
In the next two years, the first of which is Nigeria, will be entered by Fintech Farm.
Dubilet said that they have a plan to launch similar businesses in around eight other markets that are slightly bigger than Azerbaijan. Dubilet said that the launch of their next market will likely take place in the first quarter of 2022.
In Nigeria, the original plan of Fintech Farm was to use partner banks. The company says it has a co-operative license, which is required of most fintechs in the country. The founders said they would partner with a bank to scale further if they acquired 200,000 customers. How fast they can capture millions of customers and issue hundreds of millions of dollars in loans will be a determining factor for choosing a partner bank.
The key product of Fintech Farm is a card that can be used to withdraw funds from deposits and credit cards with a loan facility attached in the customer's name. The app has features such as a savings account, deposits and transfers.
Nigeria's population is hungry for credit. FairMoney and Carbon are two companies that have done for years what Fintech Farm will do. Fintech Farm wants to use credit cards to provide cheaper and more accessible credit.
There is an opportunity for a mass credit card in Nigeria. Credit cards issued by traditional banks are limited to the upper-middle class. Neobanks and alternative lenders may have credit offerings that are over 100%. We are going to fill the gap and offer fair interest rates to customers who are neglected by traditional banks.
Unlike most developed countries, the West African nation lacks an advanced credit bureau system to detail people's credit histories, so there's some scepticism to how Fintech Farm will use credit cards. Dubilet says the company's data science teams are one of the best in the world to work magic.
The co- founder of Genesis, the parent company of Jiji, will join the board of Fintech Farm. He is a partner at Flyer One.
The expertise and understanding of the Jiji team will be crucial to the growth of the farm.
According to a statement, Jiji was looking for a partner to enter the neobanking space. Investing in Fintech Farm was a strategic investment.
As it expands, Fintech Farm plans to spend a lot on marketing and hiring engineers and data scientists.
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