FairMoney Eyes Umba for International Expansion

FairMoney, a digital bank based in Paris and Lagos, is reportedly in early negotiations to acquire Umba, a credit-focused digital bank.

Rumor has it that FairMoney, a digital bank with headquarters in Paris and a branch in Lagos, is negotiating an all-stock deal worth $20 million to buy Umba, a credit-led digital bank that serves clients in Kenya and Nigeria with payroll and other financial services.

This action shows that FairMoney is looking to increase its customer base through international expansion, particularly in Kenya. However, this sale highlights the difficulties encountered by African fintechs in the current global startup market: Umba received almost $20 million from outside investors, which is comparable to an all-share deal.

The sources, who wished to remain anonymous owing to the sensitive nature of the information, said that the acquisition talks are in their early phases. Requests for response from FairMoney and Umba were not responded to prior to publication.

Tiernan Kennedy and Barry O’Mahony established Umba in 2018 in San Francisco. It is a digital bank that focuses on lending to developing economies. Loans, checking, savings, and bill payment services are just some of the financial products and services it offers to clients in Kenya and Nigeria.

According to PitchBook data, the digital bank has raised almost $20 million so far. Costanoa Ventures, ACT Ventures, Lachy Groom, Banana Capital, Lux Capital, Palm Drive Capital, Streamlined Ventures, and Monzo co-founder Tom Blomfield are among its investors.

According to PitchBook, FairMoney has raised somewhat more than $57 million with the support of notable investors such as Tiger Global, DST, Speedinvest, and others. Its most recent valuation, during a bridge financing last year, was $400–$500 million.

The Nigerian lending platform FairMoney has been exploring new growth opportunities. After an ambitious 2020 launch into the Indian market, FairMoney has been mum on the subject of the success of its Indian operations since their momentum update in 2021.

The product line of FairMoney has also been growing. The name-brand app debuted six years ago in Nigeria as a digital lender. Additional financial services, including debit cards, transfers, and payments, have been offered since then. It boasts a retail customer base of more than six million.

In a $15–20 million cash and equity agreement, FairMoney acquired PayForce, a Nigerian merchant payment service sub-brand of CrowdForce, which was backed by YC.

In an interview with TechCrunch last year, around the time of the PayForce acquisition, FairMoney CEO Laurin Hainy said, “We see ourselves as a retail bank, but the line between merchants and retail is often blurry.” “We’ve been giving the merchant space a lot of attention, and we think there are a lot of ways our separate products from PayForce could work together.”

Similarly, Umba began in Nigeria as a digital bank catering primarily to retail customers. However, the company has since branched out to offer merchant finance and business banking services in both Nigeria and Kenya. Google Play shows that the app has over 1 million installs, but it does not reveal how many registered users are actually using it.

Whether or not FairMoney decides to acquire Umba might depend on more than just the number of users or the products it offers. To begin with, it’s quite unlikely that Umba achieved substantial traction and volumes in the past four months, given that the company only introduced merchant and business-facing solutions during that time. Umba gained a microfinance license in 2022 by acquiring a majority investment in Daraja Microfinance Bank. FairMoney might be more interested in this license. With this license, Umba can provide banking services to customers in Kenya.

Microfinance bank license applications in Kenya are notoriously difficult to get. There are just fourteen microfinance bank licenses in Kenya, in contrast to more than 600 in Nigeria. By acquiring Umba, FairMoney would be able to enter the Kenyan market more quickly and avoid the three-year licensing procedure that Umba had to endure. So, after acquiring Umba, FairMoney might use it’s infrastructure or merge it’s fintech skills to offer services in Kenya.

Even though Umba wasn’t looking to sell, our sources tell us that, given its current financial situation, the offer from FairMoney might be too good to pass up. Based on financial data found in an investor pitch presentation, the fintech made $335,000 from January to June 2023 and spent $1.54 million.

Umba also sought further money last December, following its successful $15 million Series A funding round in February 2022, which was valued at $60 million. Its final valuation was $25 million, matching FairMoney’s offer, and it received $1.55 million in a bridging transaction. According to the sources, the fintech might be looking into other possibilities.

Many new companies have emerged in Africa’s banking industry with ambitions to disrupt established institutions, thanks to the tens of millions of dollars in venture financing that digital and challenger banks have received during the fintech boom.

The plot has changed now. Companies are failing to meet growth goals and encountering difficult unit economics as a result of the tightening of venture capital funding and the failure of many major investments. So, more merger and acquisition talks have ensued. Vella Finance, a Nigerian neobank that specializes in serving small and medium-sized enterprises (SMEs), was recently bought by Carbon. To top it all off, if FairMoney’s attempt to acquire Umba goes through, it will be its second deal in as many years.