Spotlight on African Cross-Border Payments Startups: Nala, Africa’s Money Mover
The Powerhouse Behind “Payments for the Next Billion” Dream
Welcome to the #Startup-Spotlight series whereby we will focus on startups providing cross-border payment solutions for the African customer base.
The first startup being reviewed is Nala. But before we delve into it, let’s quickly recap what cross-border payments entail.
Cross-border payments are a form of financial transactions involving the transfer of assets, primarily cash, between parties located in different geographical locations. The transfer of funds is usually facilitated by banks (wire transfers and electronic funds transfers), mobile money, digital wallets, international money orders, payment aggregators, and informal cross-border solutions involving third-party fund collection and disbursement.
The purposes of cross-border payments vary. They allow businesses to pay suppliers and gig workers in different parts of the world. They also facilitate immigrants in countries like the United States of America, Canada, and the United Kingdom to send money back to their families. Additionally, they enable investors to purchase assets such as stocks, bonds, and real estate in other countries, thus receiving income and profit from the investments.
In a quest to make payments borderless — blurring the lines between borders when it comes to sending and receiving cash via digital platforms, Africa is still playing catch-up with the rest of the world.
On the bright side, the narrative is changing.
The global economy is powered by cross-border payments, with Africa alone having received about USD$100.1bn in cross-border remittances in the fiscal year 2022.
However, the cross-border payments sector faces challenges, despite a forecasted market size growth from USD 160 billion in 2023 to USD 345.42 billion in 2033. Some of the challenges include:
Speed of transactions: Delays in transaction processing impact cross-border fund flow from sender to receiver depending on payment method.
Security concerns: The surge in fraudulent activities, cybersecurity threats, and data breaches discourages current and prospective users from using current digital systems facilitating cross-border payments.
High transaction costs: According to a study by the World Bank in 2022, sending $200 across borders to Africa incurs average fees of up to 8.5%, compared to the global average of 6%, making Africa the most expensive region to send money to.
Regulatory bottlenecks: Compliance requirements and regulatory policies add a layer of complexity to cross-border payments making it difficult to send money to individuals living in different locations.
Multi-currency risk: Currency risk associated with fluctuating exchange rates increases transaction costs and complexity of cross-border payments.
The future of cross-border payments in Africa depends on overcoming the current challenges in the growing payments industry. It also requires the creation of new systems and structures to enhance the user experience and lower costs for individuals and businesses relying on cross-border payment platforms to send funds and settle bills.
Back to Nala:
Who are they?
What do they do?
What value do they create for customers?
What’s unique about them?
How do they make money?
Where are they going?
Nala: The Powerhouse Behind “Payments for the Next Billion” Dream
Facts about Nala
Founder: Benjamin Fernandes
Total Amount Raised: $60 million — $10 million seed round and $40 million Series A
# of Pivots: 2
# of Customers: Customer base of 500K customers
Key African Markets Served: Tanzania, Kenya, Nigeria, Senegal, and Uganda
Nala is a venture-backed fintech firm that facilitates digital payments by enabling cross-border transactions. The company’s money transfer application allows money to be sent from the United Kingdom, USA, and European Union to Nigeria, Kenya, Tanzania, Senegal, Uganda, Côte d’Ivoire, and Cameroon.
The core problems Nala’s digital payments system solves include:
Speed of transfer: How fast are transactions processed? Faster money transfers ensure recipients have timely access to the funds and can use them when needed.
Foreign exchange rates: High foreign exchange rates affect the total cost of sending money or making payments
Payment reliability: Predictability of a platform to deliver its promise in terms of receiving and sending promptly without delays or failure of the system
Nala’s mobile application is currently available on Apple Store and Google Play.
Key Products
Nala’s product portfolio is composed of the following services:
Rafiki: B2B Payments rails that can be easily integrated with businesses to facilitate seamless cross-border payments
Instant money transfers: Fast, affordable and reliable international money transfers
Nala Mobile app: Nala’s mobile application enables users to manage personal finances, make payments, and transfer money
Nala’s Value proposition
The core value proposition of Nala includes the following unique selling points:
Real-time transactions: Nala guarantees instant credit transfers
Cost-effectiveness: Competitive fees and exchange rates attract customers seeking value for their money
Access to comprehensive transaction history: Users get access to their payment transaction history, which can be exported instantly in PDF or Excel
Real-time transaction status: The customer can track the money at every stage before it reaches the recipient
Multilingual chat support in Swahili and English
Target Market
Nala’s target market is comprised of:
Africans in Diaspora: African expatriates in developed countries who invest in or support their families in Africa
African Businesses: African companies seeking to make payments to individuals residing in various African countries and globally
Revenue Model
Nala’s revenue stream is composed of:
Transaction fees: Using mid-market rates as a baseline, NALA charges a fee for each money transfer
Exchange rate margin: Nala adds a very tiny percentage markup on the exchange rate
Bank Account transfer charge: Nala charges a small fee for bank transfers and Buy Goods and Paybill services in Kenya.
Key Partnerships
Partnerships are baked into Nala’s business model. They are the force of good driving its growth. The fintech has invested in inking strategic partnerships in Africa, and Europe. Nale has more than 200 partners.
Some key strategic partners in their pipeline include:
Payment service provider licences: NALA has been granted licences by PSP providers in Tanzania, the UK, the USA, and 19 countries from the EU
Banks and other financial institutions: The fintech has integrated with banks across Africa to ensure reliable and seamless transactions
Mobile money operators like M-pesa: Partnerships with mobile money operators in specific African countries, such as Kenya, ensure that Nala leverages the extensive mobile money network to improve its cross-border payment services
Nala has also invested in community programs aimed at empowering connections and empowering individuals through community engagement.
Key Milestones and Achievements
The culmination of Nala’s journey is crowned by the following snapshot of its achievements:
Bonus Watch about Cross-Border Payments:
Check out this video by The Flip featuring Nala’s CEO, Benjamin Fernandes explaining >> Why are cross-border payments so hard?