Nalaa money transfer startup that is now expanding its portfolio with a new B2B payments platform, has raised $40 million in equity funding in a rare deal that becomes one of the largest Series A transactions in Africa.
The oversubscribed round was led by San Francisco-based venture capital firm Acrew Capital, with participation from DST Global, Norrsken22, HOF Capital, existing investor Amplo and a number of angel investors, including fintech founders Ryan King of Chime and Vlad Tenev of Robinhood.
Founder and CEO of Nala Benjamin Fernandes told TechCrunch of the new capital injection, which follows a $10 million injection seed in 2022, will fuel the company’s global growth plans that involve expanding its money transfer business to serve Asian and Latin American markets.
Currently, Nala, through its consumer app, allows people in the EU, UK and US to send money via 249 banks and 26 mobile money services across 11 African markets. When Nala integrated with mobile money services like M-Pesa in Kenya, senders can pay their bills directly into local mobile wallets.
Fernandes says the decision to add payment features was driven by user demand for 360-degree control over their money. The fintech plans to expand these offerings to new markets, starting with Asia.
Nala is also doubling down on its B2B payments platform launched in March to serve global businesses making payments to and from Africa.
“This $40 million funding round marks a milestone for Nala. It will allow us to go beyond remittances and expand our reach beyond Africa, building a robust payments ecosystem. We are reinvesting this money to improve our infrastructure, ensuring reliable and low-cost payments for all. With the launch of our own payment rails and the expansion of our B2B Rafiki platform, we are not just talking about change, we are building it. We have bold and ambitious plans, give us a few years,” said Fernandes.
Fernandes launched Nala in 2017, initially to offer local money transfers in Tanzania, but shifted focus to enable foreign remittances in 2021.
The startup’s new B2B platform, Rafiki, also powers Nala’s consumer app. Fernandes told TechCrunch in a previous interview that they decided to build the payments platform to ensure the reliability of its remittance services and to serve global businesses looking for reliable services.
With Rafiki, which integrates directly with banks and mobile payment service providers, Nala says it can guarantee the availability of its services to consumers. In addition, its own payment infrastructure means lower fees for users of its consumer app, making it more competitive.
According to Fernandes, ensuring service delivery has been the driving force behind the growth of the startup’s consumer business, which currently accounts for over 90% of its revenue. He added that Nala is on track to cross the 500,000 customer mark and has already achieved profitability.
The payments platform is also gaining customers with early adopters including UK fintech TransferGo, which is using Rafiki for payments in Africa.
“For Rafiki, real customers on Nala range from international payroll providers like Cadana to international money transfer companies like TransferGo and international banks doing cross-border payments. The goal is to enable financial institutions and services to do cross-border payments,” Fernandes said.
Opportunities in the field of remittances
Nala’s plans for remittance services to other emerging markets such as Asia and Latin America come after the World Bank predicted strong growth in the sector this year.
According to the World Bank’s Migration and Development report BriefRemittance flows to sub-Saharan Africa are expected to increase by 1.5%, after a slight decline in 2023 to $54 billion. Growth is also expected in regions such as East Asia and the Pacific (excluding China), South Asia, and Latin America and the Caribbean. This growth means that demand for remittance services will persist.
“In India, migrants send over $125 billion a year and the market is growing, with more and more people leaving the country. This creates opportunities for these customers, but also for international trade between regions, which will only increase. Trade between regions in Asia and Africa is growing and money needs to flow reliably for that to happen,” Fernandes said.
While demand for remittances is growing, the World Bank notes that cross-border transfers remain expensive. The global average cost of a $200 transfer, for example, is 6.4% of the amount sent. However, digital remittances are cheaper (5%) than non-digital transfers (7%), which speaks to the services provided by Nala and its peers, including Flutterwave. Nala says that reducing the cost of sending money is at the heart of its offering.
Lauren Kolodny, Founding Partner of Acrew, said: “We believe Nala will be the remittance leader for the next generation of Africans, who are expected to represent 35% of the world’s youth by 2050,” adding that the team “has the deep local knowledge, fintech expertise and unique community development know-how to build the cross-border payment rails for the next billion people.”
