FairMoney, a digital bank based in Lagos and headquartered in Paris, is in talks to acquire Umba, a digital bank focused on credit services in Nigeria and Kenya, for a $20 million all-stock transaction.
This move signifies FairMoney’s ambition to expand its reach, particularly in Kenya, but also highlights challenges faced by fintech companies in Africa’s startup environment.
Acquisition Talks and Ambitions
According to sources familiar with the matter, discussions regarding the acquisition are at an early stage. The acquisition would allow FairMoney to enter new markets and broaden its financial services offerings. However, the $20 million all-stock transaction is equivalent to Umba’s funding from external investors, indicating the financial challenges fintechs face.
Read also: FairMoney purchases PayForce for merchant digital banking
Umba, founded in 2018 in San Francisco by Tiernan Kennedy and Barry O’Mahony, offers a range of banking solutions, including loans, checking accounts, savings accounts, term deposits, and payment services for bills in Nigeria and Kenya. The digital banking entity has raised close to $20 million in funding from investors such as Costanoa Ventures, Tom Blomfield (Monzo’s co-founder), and others.
FairMoney’s Expansion and Strategic Acquisitions
FairMoney, initially launched as a digital lending platform in Nigeria, has diversified its offerings to include financial services such as debit cards, transfers, and payment options. With over six million retail customers, FairMoney has expanded into India and made strategic acquisitions, including PayForce, a Nigerian merchant payment service, to enhance its offerings and market reach.
Umba’s Microfinance License and Appeal to FairMoney
Umba’s recent acquisition of a microfinance license in Kenya, enabling it to deliver banking services, maybe a critical factor in FairMoney’s interest. While Umba’s recent financial performance has been modest, with revenues of $335,000 against expenses of $1.54 million from January to June 2023, its microfinance license and strategic positioning could make it an attractive acquisition target.
Fintech Surge in Africa and Mergers/Acquisitions
Africa’s fintech sector has seen significant venture capital investment, leading to the rise of digital and challenger banks. However, the landscape is becoming increasingly constrained, with many ambitious investments failing to meet growth projections. This has led to a rise in merger and acquisition discussions, as seen with Carbon’s recent acquisition of Vella Finance.
FairMoney’s potential acquisition of Umba represents a strategic move to expand its market reach and offerings in Africa’s fintech sector. While the acquisition talks are in the early stages, the transaction could signify a trend of consolidation and strategic partnerships in the region’s rapidly evolving fintech landscape.