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  4 Strategic Lessons Neobanks and FinTechs Can Learn Sometime in August of 2021, Kuda Bank, one of  Nigeria’s leading fintech companies, announced it has closed a $55 million Series B funding co-led by Valar ventures and Target Global. This boosted their valuation to $500 million, making it the 7th largest bank by valuation in Nigeria behind bank giants, FUGAZ (First Bank, UBA, Guarantee Trust Bank, Access and Zenith) and Stanbic IBTC bank.
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Founded in 2018 by Babs Ogundeyi and Musty Mustapha, Kuda Bank is a full-fledged digital-only bank that is operating with a banking license. Kuda Bank fits perfectly into the definition of neobank, which is a type of direct bank that operates exclusively online without traditional physical branch networks. It also suits the term “challenger bank”, because it is challenging conventional ways of financial services.  In recent times, Kuda Bank has suddenly become a household name for digital banking. It is common among the younger generation of Nigerians. I couldn’t stop myself from loving the bank too. Doing an in-depth study on the Bank, I observed the reasons behind their sporadic rise. In this article, I discuss 4 lessons neobanks and FinTechs can learn from Kuda Bank.
  • Design A Democratized Banking Operation
Just as Kuda Bank often quipped “bank of the free”, Kuda Bank’s financial operation is all too personalized to a point that customers see through its transparency. The biggest secrets FinTech must learn is this: the new generation of customers are enlightened, more interested in their financial literacy and want to have a transaction that is institutionally controlled. Little wonder, these days, the rise of crypto adoption grows at an astronomic pace. In the past, a bank customer would have a personal banker who saves, transacts, advises and invests on his behalf. However, the narrative is changing. Digital financing has promised the destruction of the institutionalization of money. This is a trend neobanks and FinTechs must look, at and create a more personalized banking structure.
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  • Digitization, Codification, Encryption Of Security 
If there is anything that customers are wary of, it is the security of their money. One would wonder since Kuda Bank has no branches, no physical presence, how do they keep customers’ money? Simple – encryption. Encryption is coding information, like ‘talking’ to your friend with signals so no one else knows what you’re saying. Kuda Bank uses a high level of encryption to protect all her customers’ financial information from being accessed by people they would rather not speak of. This is just a fundamental knowledge of what encryption means, however, it is more complex than that. Further, Kuda has utilized the trio of Passwords, PINs and Biometrics, which secure the accounts of their customers. Kuda PIN for signing in to your account on the day to day, your transaction PIN for authorizing payments and your card PIN for you know what. There are also biometric login options, aka Face ID and fingerprint, which can replace PINs for signing in to an account and authorizing payments, just in case, for customers who aren’t interested in cramming numbers.
  • Empower Customers With Exciting Financial Management And Spending Transparency 
Many customers do not understand why they can’t account for their money. They feel that their money is going somewhere they aren’t sure of. Sometimes it can be frustrating and somewhat confusing. Have you ever wondered why your salary is exhausted within a short time? On the other hand, Kuda Bank helps its customers in managing their finances through its budgeting platform. Financial clarity is everything! The budget on Kuda will show you details of your spending, so you can make better money decisions. The lesson for FinTechs is the transparency of their customers’ financial transactions. 
  • Eliminate Suspension 
Many customers mistrust their banks due to several deductions of their money. There are cases where there are hidden charges and strings attached. On the other hand, Kuda Bank has developed a banking service that opera free of charge for all their services, not even financial transactions, card maintenance and so on. The ability to make their service delivery free of ridiculous charges that regular banks charge has earned them quite a good following and admiration. Featured image source: Crunchbase
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This article was first published on 14th March 2022

nnaemeka-emmanuel

Nnaemeka is an academic scholar with a degree in History and International Studies from the University of Nigeria, Nsukka. He is also a creative writer, content creator, storyteller, and social analyst.

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