Fairmoney Secures $42M Series B Funding Led by Tiger Global

Neobanks and the Evolution of Fintech Funding

Neobanks have been at the forefront of attracting venture capital within the consumer fintech startup landscape. However, despite their collective dominance, these institutions don't adhere to a single, uniform operational model.

Currently, five distinct models are observed within the neobank sector. Nubank, valued at $30 billion, exemplifies the credit-led model. This approach involves initially offering credit products, such as cards or in-app loans, and subsequently expanding into broader banking services as a means of accessing additional customer offerings.

FairMoney's Series B Funding and Expansion Plans

Nigerian fintech startup FairMoney also utilizes this credit-led model. The company recently announced a $42 million Series B funding round, aimed at diversifying its services and establishing itself as a comprehensive financial platform for its users.

Tiger Global Management spearheaded the investment, with participation from existing investors including DST Partners, Flourish Ventures, Newfund, and Speedinvest. This funding follows a €10 million Series A raise two years prior and a €1.2 million seed round in 2018.

Founded in 2017 by Laurin Hainy, Matthieu Gendreau, and Nicolas Berthozat, FairMoney began as an online lender providing instant loans and bill payment solutions to customers in Nigeria.

In February, CEO Hainy revealed the company had been expanding into the Indian market for six months. Impressive 2020 performance figures were highlighted, including a total loan volume of $93 million disbursed to over 1.3 million users, who submitted more than 6.5 million loan applications.

Furthermore, FairMoney processed over 500,000 loan applications from more than 100,000 unique users in India.

Securing a Microfinance Bank License and Growth in Nigeria

Since then, FairMoney has successfully obtained a microfinance bank (MFB) license. This license permits the company to function as a regulated financial service provider within Nigeria.

“We’ve received our MFB banking license, which now allows us to open current accounts for our users, and we are doing so on a significant scale,” Hainy stated. “Opening accounts for both existing and new customers allows us to avoid the substantial customer acquisition costs incurred by many competitors.”

This strategy has positioned FairMoney as, according to the company, the largest digital bank in Nigeria. Currently, 1.3 million of the company’s 3.5 million registered users hold unique bank accounts.

FairMoney projects loan disbursements of $300 million to these account holders this year, financed through bond issuances. The company’s capital markets activity has attracted substantial investment in its unlisted bonds from several investment banks.

Expanding Service Offerings and Targeting SMEs

FairMoney offers individual loans ranging from ₦1,500 (~$3) to ₦500,000 (~$1,000) with repayment terms spanning days to six months. Recognizing the growing demand, the company is now extending its services to include small business loans within Nigeria’s retail sector.

The company is also preparing to issue debit cards, which are more commonly used in the Nigerian market than credit cards.

“Our goal is to provide customers with a complete banking experience by year-end, encompassing P2P transfers, lending, debit cards, and current accounts,” Hainy explained. “Additionally, we are developing supplementary services such as savings products, stock trading, and potentially crypto-trading, contingent upon regulatory developments.”

Strategic Focus and Continental Fintech Trends

Unlike many African companies that pursue expansion after a Series B raise, FairMoney is adopting a different approach. Hainy describes this round as a “focus round,” prioritizing consolidation in Nigeria and India, and foregoing expansion into new markets.

“We believe there is substantial work to be done and numerous challenges to overcome in both India and Nigeria,” Hainy elaborated. “We are concentrating on strengthening our position in Nigeria by expanding our banking services and becoming a major commercial bank, while simultaneously building a significant credit portfolio in India.”

This year has witnessed substantial capital inflow into African fintech startups, with Flutterwave, TymeBank, and Chipper Cash securing nine-figure investments. OPay is also reportedly in discussions for a similar raise.

Nigerian fintechs are leading this trend, consistently attracting capital at an impressive rate.

Investor Landscape and Tiger Global’s Return

While local investors often provide early-stage funding, international investors typically dominate the later stages of investment. TymeBank secured funding from U.K. and Philippines venture capital firms, while Chipper Cash received investment from SVB Capital, Ribbit, and Bezos Expeditions. Avenir Growth Capital and Tiger Global backed Flutterwave.

Tiger Global is re-entering the African market with its investment in FairMoney, marking its second African startup investment this year, following its backing of Flutterwave in March. “We are excited to partner with FairMoney as they build a better financial hub for customers in Nigeria and India,” said Scott Shleifer, partner at Tiger Global. “We were impressed by the team and the strong growth to date and look forward to supporting FairMoney as they continue to scale.”

Hainy views this investment as a positive signal for the continent, attributing Tiger Global’s decision to FairMoney’s ability to scale rapidly and demonstrate profitability while operating in both banking and lending.

“A key discussion point is sustainability – how long can digital banks operate as financial service providers while incurring losses?” Hainy noted. “Our ability to achieve profitability demonstrates a viable model and provides confidence to our shareholders and customers.”

To achieve its ambition of becoming a comprehensive financial hub, FairMoney is actively recruiting talent, with 150 open positions currently available.