NALA Shook Remittances—Now Its Founder Wants To Put Money Where His Mouth Is

By  |  July 11, 2024

Tanzania-born fintech startup, NALA, buoyed by fresh injection of significant capital, is looking to stand out with bold ambitions. NALA recently secured a hefty USD 40 M Series A, an investor vote of confidence that is a testament to its remarkable growth in the African cross-border payments arena.

But NALA’s aspirations reach far beyond the fiercely competitive battleground of African diaspora remittances. This fresh capital fuels the company’s pursuit of bigger ambitions, as hinted by DFS Labs co-founder Stephen Deng, an early NALA investor,

From USSD Dreams to Remittance Reality

NALA’s story began in 2016 with a vision to become an “offline Venmo for Africa” by building a USSD-based payments network. However, the limitations of relying on third-party integrations and navigating a crowded domestic payments market led to a strategic shift in 2020.

NALA pivoted to international remittances, targeting the African diaspora with a compelling proposition: speed, reliability, and competitive fees. This decision, as Deng writes in a recent blog, capitalised on a customer base with “the spending ability to drive revenues.”

The decision paid off. Initially targeting the EU, UK, and US markets, NALA has facilitated payments across 249 banks and 26 mobile money services in 11 African countries over the last two years. The company quickly gained traction, with its revenue growing 10x over the past year and achieving profitability. However, NALA’s aspirations extend beyond being just another remittance player.

“He [Fernandes] had tapped into a highly lucrative revenue line with international remittances. Unstable domestic currency in Africa meant that the foreign exchange business was (and still is) booming and it would have been easy to limit the company to harvesting those margins for the next handful of years,” writes Deng.

But the fintech is looking beyond that. The African remittance landscape is seeing heightening competition. Established players like WorldRemit and Wise hold significant market share, while several fellow African startups are aggressively entering the fray. Additionally, the persistent service hiccups of these remittance services dependent on external partners pose a challenge.

“He [Fernandes] started messaging me about the domestic B2B payments market and how it aligned with the mission,” Deng emphasises. “When Benji talks about ‘payments in Africa being 1% built,’ he truly believes it.”

Building Rafiki: A Weapon for a New Battleground

One of the critical challenges NALA faced was the 15% failure rate in its payment partners’ infrastructure. This reliability issue is not unique to NALA but affects the entire remittance ecosystem, leading to customer dissatisfaction and potential revenue loss. To address this, NALA developed its own B2B payment platform, Rafiki. This move ensures payment reliability and minimises user charges, effectively transforming a challenge into an opportunity.

“We’re building for Africa what dLocal has done for LATAM and AirWallex/Nium for APAC,” Fernandes, NALA’s founder explains.

NALA is not content with simply competing in the remittance space. Their secret weapon for the future, Rafiki, is built on in-house infrastructure, designed to bypass unreliable third-party networks and provide a high level of reliability. In March, Fernandes revealed data that suggests 99.3% of all Rafiki-powered transactions are completed within 1 hour, besting competitors and trumping the industry average.

This focus on reliability resonates with NALA’s core belief, as Fernandes states, “speed and reliability are often more important to customers than even price.”

Solving a Shared Pain Point

Fernandes, who can be credited with popularising the expression turned mantra “payments in Africa are 1% built” in fintech circles (#1PercentBuilt is also inscribed on the walls at NALA offices), wants to put money where the mouth is. He believes Rafiki can be a game-changer in the B2B payments space within Africa, a market notorious for inefficiencies and delays. Rafiki, with its focus on seamless integration and robust infrastructure, aims to address this critical gap.

Rafiki not only powers NALA’s consumer app but also serves other clients like TransferGo and global payroll providers for African payouts. By ensuring that transactions are seamless and dependable, NALA is not merely hedging against competition but hopes to solve a widespread problem, thus unlocking a new business line and adding a potentially crucial dimension to its offerings.

“This infrastructure, born not by choice, but rather out of necessity, is the backbone of our consumer fintech app and our B2B payments platform,” the Founder emphasises.

Strategic Expansion into New Markets

Armed with fresh funding, NALA is set to expand its footprint into Asia and Latin America, regions with burgeoning opportunities for fintech solutions. This move aligns with NALA’s broader strategy to lower remittance costs and enhance its payment ecosystem. Global remittances to Africa was estimated by the World Bank at USD 54 B in 2023, highlighting the immense opportunity for innovative fintech solutions.

Furthermore, NALA’s consumer app, leveraging Rafiki’s infrastructure, aims for users to access reliable and cost-effective services. This dual approach not only looks to solidify NALA’s position in the remittance space but also diversify its revenue streams and enhance its market resilience.

Competition and Market Dynamics

NALA’s expansion comes at a time when the remittance market is becoming increasingly heated with rivals doubling down. Competitors like Kuda, LemFi, Send by Flutterwave, and Eversend are all vying for a share of the lucrative diaspora remittance market. Kuda, for instance, is making significant strides with its planned launch of a multi-currency digital wallet in Canada by Q3 2024, targeting the large Nigerian diaspora population. Similarly, other players are innovating with multi-currency wallets, competitive transaction fees, and varying exchange rates.

However, NALA’s approach differs in its emphasis on building a reliable payment infrastructure that benefits both its consumer app and external clients. This strategy positions NALA not just as a remittance provider but as a network addressing fundamental market issues.

The Vision: A Comprehensive Fintech Ecosystem for Africa

NALA’s long-term vision appears to be a comprehensive financial services platform for Africa. The recent funding will likely fuel expansion into payment processing for businesses, adding another dimension to its offerings.

Whether NALA can successfully navigate the complexities of this broader vision and differentiate itself in a crowded market remains to be seen. However, their journey thus far, characterised by strategic pivots, a focus on reliability, and a willingness to tackle new challenges, suggests a company unafraid of taking calculated risks to carve its own path in the evolving African fintech landscape.

With the new funding led by Acrew Capital and significant participation from DST Global, Norrsken22, and HOF Capital, the Y Combinator alumnus is poised to expand its horizons, solving critical payment reliability issues and unlocking new business opportunities.

Featured Image Credits: The Citizen Tanzania

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