Sources tell Eltrys that Lagos-based FairMoney, headquartered in Paris, is in talks to purchase Umba, a credit-led digital bank that provides payroll and financial services to Nigeria and Kenya, for $20 million all-stock.
The move shows FairMoney’s desire to expand into Kenya to gain customers. A $20 million all-share acquisition would be about equal to Umba’s outside investor funding, highlighting the hurdles fintechs in Africa face in a tough startup environment.
These sources requested anonymity since the specifics are private. Acquisition discussions are still in their early stages. FairMoney and Umba declined to comment before publication.
Tiernan Kennedy and Barry O’Mahony created the San Francisco-based credit-led digital bank Umba in 2018 to serve developing countries. It offers loans, current accounts, savings accounts, fixed deposit accounts, and bill payments to Nigerian and Kenyan consumers.
PitchBook reports $20 million in fundraising for the digital bank. Costanoa Ventures, Monzo co-founder Tom Blomfield, Lachy Groom, ACT Ventures, Lux Capital, Palm Drive Capital, Banana Capital, and Streamlined Ventures invest.
Tiger Global, DST, Speedinvest, and others have supported FairMoney, which has raised over $57 million, according to PitchBook. It was worth $400–$500 million in a bridge round last year.
Nigeria-based FairMoney, recognized for its loan services, is seeking growth opportunities. FairMoney aggressively entered India as its second market in 2020, but it has not provided any updates on its performance since 2021.
The output of FairMoney has also grown. The startup’s app was a Nigerian digital lender six years ago. Debit cards, transfers, and payments have been introduced since then. Over six million retail consumers are claimed.
FairMoney previously acquired PayForce, a sub-brand of YC-backed Nigerian merchant payment firm CrowdForce, for $15–20 million in cash and equity.
“We see ourselves as a retail bank, but the line between merchants and retail is often blurry,” FairMoney CEO Laurin Hainy told Eltrys last year while discussing the PayForce purchase. We’ve thought about the merchant area more and more, and we see many synergies between PayForce and our independent builds.”
In Nigeria and Kenya, Umba began as a retail-focused digital bank before expanding into merchant finance and corporate banking. The software has over 1 million installations on Google Play, but its registered and active users are unknown.
Umba’s purchase by FairMoney may not depend on user counts or product offers. For one, Umba released merchant and business-facing solutions in the past four months, making it unlikely to have gained considerable momentum and volumes. FairMoney may be more interested in Umba’s 2022 microfinance license after obtaining a controlling stake in Daraja Microfinance Bank. This license lets Umba bank in Kenya.
Kenyan microfinance bank licenses are difficult to get. Kenya has 14 microfinance bank licenses, compared to 600 in Nigeria. FairMoney might enter Kenya faster by purchasing Umba, which required three years to license. FairMoney might launch its Kenyan services using Umba’s infrastructure or both fintech competencies after an acquisition.
Umba wasn’t actively pursuing a sale, but FairMoney’s offer may appeal given its financial situation, sources say. According to an investor presentation deck Eltrys received, the fintech earned $335,000 and spent $1.54 million between January and June 2023.
Last December, Umba sought more money after securing $15 million in Series A funding at a $60 million value in February 2022. It raised a $1.55 million bridge round at $25 million, matching FairMoney’s offer. Sources believe fintech may investigate alternative possibilities.
Digital and challenger banks in Africa received tens of millions of dollars in venture financing during the fintech boom, spawning several businesses with intentions to challenge incumbents.
The tale has changed. VC financing is tightening, and many huge investments are missing growth forecasts and having poor unit economics. More M&A talks have ensued. Neobank Carbon, a Nigerian bank for SMEs, purchased Vella Finance last month. If successful, FairMoney’s purchase of Umba would be its second in two years.
Sources claim FairMoney is in discussions to purchase Umba for $20M all-stock.
