A UK-based startup, Fintech Farm, says it has received seed funding of $7.4 million. It makes digital banks for people in developing countries and sells them.
Flyer One Ventures and Solid Ventures were the primary investors in the seed round. TA Ventures, Jiji, u.ventures, and AVentures Capital were among the other investors. Within the next 24 months, the company wants to use the funds to establish neobanks in eight nations.
Venture capitalists are pouring money into digital banks (also known as “neobanks,” “challenger banks,” or “disruptive” banks). A large number of new entrants have emerged in recent years, aiming to take on established players in their respective marketplaces.
Among other things, the Ukrainian neobank MonoBank has more than 4.5 million customers and made more than $100 million in just a few years. A co-founder and chief technology officer of Monobank, Dmytro Dubilet, wants to do the same thing in emerging markets with his new company. He helped Monobank grow in Europe.
He started Fintech Farm in 2013 with Nick Bezkrovnyy, a former KPMG U.K. director who led M&A in the world of fintech, and Middleware founder Alexander Vityaz.
With its credit-driven neobank strategy, Fintech Farm entered Azerbaijan’s market in November 2021, offering loans to customers with spotty credit histories via cards and a mobile app.
According to the traditional model in Britain and Europe, neobanks (Monzo, Starling Bank, Revolut) prefer to have their own banking licence and offer their own range of financial services. Fintech Farm is a little bit different because it is based in the UK and has a lot of experience in this field.
That’s why, based on how it works, it makes sense to have a different business model. Fintech Farm has a different name in each country where it starts. It has the same design and mascot, which is a lion with a lilac mane who is very funny to look at.
Fintech Farm, operating as Leobank in Azerbaijan, has issued over 100,000 cards in two months and wants to reach one million by year’s end.
This is just the beginning. In the next two years, Fintech Farm plans to enter eight new markets in Africa and Asia, with the first one being Nigeria.
Even though Fintech Farm originally intended to cooperate with a local bank in each country where it expanded, it is following a different approach in Nigeria.
Fintech Farm currently holds a microfinance banking licence, which is essential for most fintechs in the country. When it reaches a customer base of 200,000, Fintech Farm’s founders said they will work with a bank to help it grow. Choosing a partner bank will be based on how quickly they can get millions of customers and issue hundreds of millions of dollars in loans, says Bezkrovnyy. This is not just about licencing and infrastructure support.
One of its main products is a card that can be used as both a debit card and a credit card. This card has a loan facility attached to it in the customer’s name. Some of the app’s features include a savings account, deposit, and transfer options.
Almost all of the money Fintech Farm makes comes from loans, which is what companies like FairMoney and Carbon have been doing for a long time now. Unlike these native neobanks, Fintech Farm wants to use credit cards to make cheap and easy loans.
There’s some scepticism about how Fintech Farm will use credit cards to run because the West African country doesn’t have an advanced credit bureau system that can show people’s credit histories. It’s hard to argue with Dubilet’s confidence, who calls the company’s data science staff “one of the best in the world.”
Vladimir Mnogoletniy, a co-founder of Genesis, the parent company of African online classifieds site Jiji, will join the board of Fintech Farm as part of this financing round. He will also serve on the board of the company. In the same time, he is a co-lead investor at Flyer One.
The founders of Fintech Farm think that Mnogoletniy and his team will be very important to their company’s growth. One of the biggest e-commerce platforms on the GMV (Gross Value of Trade) level, Jiji, was looking for a partner to help it enter neobanking, and investing in Fintech Farm was a smart move to help them do that.
Using the funding, Fintech Farm expects to spend a lot of money on marketing and recruiting top-notch engineers and data scientists.
