Now Nala has raised $40 million to build its own payment rails allowing global businesses to move money to and from Africa.



Benjamin Fernandes launched&nbsp;his fintech startup&nbsp;Nala in 2018 with the aim of speeding up money transfers within his native Tanzania. Over the next two years, the now 31-year-old former television host and Stanford MBA hit one daunting setback after another.



First, Tanzania’s largest telecommunications provider issued Nala a cease and desist letter, cutting off Fernandes’ access to one of the primary pieces of infrastructure he had been using to transfer money. Then his cofounder quit just a week before demo day at Y Combinator, the startup accelerator Nala had gained entry to in 2019, after five previous unsuccessful attempts. Finally, in 2020, the Covid pandemic hit, reducing the already lackluster demand for Nala’s domestic payment service.



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“We had to shut it down. That was really tough,” says Nala CEO Fernandes, speaking from his New York office a day after the company was featured on the iconic Nasdaq billboard in Times Square. “We had to do layoffs and clean up the team.”



Instead of walking away, over the next two years Fernandes recast and rebuilt Nala into a cross-border remittance service that now enables African migrants working in the U.S. and 20 European nations to send money back home to 11 African countries, including Kenya, Nigeria, Uganda, Tanzania and Rwanda. In all, it now has more than 500,000 registered customers, though none live in Africa.



While Nala isn’t the only one in this business, or always the cheapest service, it’s adding extras built with an understanding of its target market. In Kenya, for example, Nala directly integrates with dominant mobile money service M-Pesa, allowing those working abroad to pay their families’ utility bills back home directly from their account. “What we noticed is that diasporans care about the control of money,” Fernandes says.



This is a growth business. The United Nations projects that Africa’s population will nearly double to 2.5 billion by 2050, making the continent the birthplace of nearly one in four working-age people on Earth. Roughly a million Africans leave each year seeking work.



But Fernandes has even bigger plans. In July, despite a depressed fintech market, his 100-person startup raised $40 million (at an estimated valuation of more than $200 million, according to a shareholder with direct knowledge of the transaction). Only five other African fintechs have raised $40 million or more in a Series A fundraising since 2015, according to PitchBook. San Francisco-based venture capital firm Acrew Capital led the round, and Texas-based VC firm Amplo and DST Global, which manages $5 billion in assets, also invested.



(Most of Nala’s employees are based in Kenya and the U.K. and Fernandes spends most of his time at the London office.)



This isn’t money needed to sustain current operations. In 2023, Nala’s revenue exceeded $15 million, and this past February it became profitable on a generally accepted accounting principles (GAAP) basis, Fernandes says. “We have achieved profitability on the net profit basis,” affirms Nala’s Chief Financial Officer Andrei Klevtsov, who was formerly head of accounting at Wise. “On the EBITDA level the result is the same—we are still a very young company and don’t have any significant adjustments from non-operating activities.”



Instead, Fernandes aims to use the new cash to grow in two ways. First, Nala plans to expand its consumer remittance business to South Asian markets, including India, Pakistan and the Philippines, followed by Latin America.



Second, a share of the new capital will go into securing more licenses and funding the development of Rafiki, a cross-border payment infrastructure designed for global businesses. (Rafiki means “friend” in Swahili, a language spoken predominantly in Tanzania and neighboring Kenya.) As Fernandes tells it, the payments infrastructure in Africa is today only one percent of what it could and should ultimately be. Africa remains the most expensive continent to send money to due to regulatory issues, currency fluctuations, limited competition and a lack of payment infrastructure specifically built for global businesses.



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Growing up in&nbsp;Dar es Salaam, Tanzania, Fernandes didn’t have many tech founders as role models. Still, he wasn’t without inspiration. His parents are both renowned gospel preachers who never went to college, but built the&nbsp;<a href="https://worldagapeministries.com/" rel="noreferrer noopener" target="_blank">World Agape Ministries</a>, and launched an evangelical television station. So at 17, Fernandes started working as a television personality, hosting kids’ talk shows. He then gained international attention covering major sports events such as the 2012 Olympics in London and the 2014 World Cup.



The year after earning his bachelor’s in accounting (with a computer science minor) from the University of Northwestern-St. Paul in Minnesota in 2014, Fernandes was accepted at Stanford business school on a full scholarship as an African MBA fellow. He first started exploring a payments business while at Stanford and says his classmates–steeped in Silicon Valley’s try, fail, and try again startup culture– have been a source of encouragement.



After reinventing Nala in 2021 as a cross-border remittance service, Fernandes used the large social media following he had developed as a former TV host to grow the business. He went on Clubhouse to find customers and was able to market the company to his nearly 450,000 Instagram followers, asking them to test his products. In January 2022, he raised $10 million in funding led by Amplo, a Texas-based VC firm that specializes in international investments.



Nala makes money through foreign-exchange markups–the extra charge it levies on top of exchange rates. And it benefits from helping to supply hard currencies on a continent where many countries are&nbsp;<a href="https://www.forbes.com/sites/segunolakoyenikan/2023/07/02/africa-becomes-a-casualty-in-the-war-against-inflation-as-dollars-dry-up/">facing shortages</a>. “The banks never have enough dollars,” he says. “Because I bring in dollars to Africa, banks are willing to pay me a premium for dollars. So I have leverage on what I can charge for dollars in the market.”



With its new Rafiki infrastructure, Nala aims to create reliable, lower-cost payment rails that streamline payouts and collections for businesses. That means global enterprises, such as payroll and remittance companies looking to trade with Africa but lacking the necessary regulatory approvals, can connect to Rafiki where the infrastructure is already licensed. This would allow them to make payouts to multiple employees and repatriate collections from customers.



“For example, DHL needs to handle collections in Nigeria and repatriate the funds to Germany, where we have an entity,” Fernandes says. “Or consider businesses like Netflix trying to handle collections from customers. That’s the target market for Rafiki.”



These cross-border services are similar to those provided by global fintech companies such as dLocal and Airwallex, which revolutionized payments for businesses in Latin America and Asia, respectively. “Rafiki is the dLocal for Africa,” Fernandes says.



The Rafiki infrastructure business was born out of the founder’s desire to address Nala’s own payment challenges. In the early stages, when transaction volumes were picking up, Nala experienced reliability issues as it used external payment rails—an infrastructure that allows the electronic transfer of money from one person to another. “The cost of operation and support was becoming so expensive for us that we decided it’s better to solve the actual problem,” says Fernades. “We ended up building our own payment rails.”



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Fintech companies&nbsp;such as Remitly, Taptap Send, LemFi and Sendwave also offer services allowing workers to send money back to Africa digitally. In fact, the youngest of these companies launched a year before Nala entered the cross-border payment market. But Nala has tried to distinguish itself in several ways. By securing necessary licenses and regulatory approvals to facilitate money transfers, the startup has established direct connections with banks and telecoms in the region. This allows it to bypass multiple payment networks, which have a history of slowing down transactions, ensuring that funds are delivered directly to the beneficiary’s account.



Fernandes is also aiming to give individual customers more control over how the money they send home is used. “We enable direct bill payment in some countries, such as Kenya, where you can pay for electricity bills, water bills and other services,” he notes. “That’s actually one of our most popular features.”



Now he wants Nala’s business to extend beyond remittances into additional financial services that empower customers. For instance, the startup will soon introduce a feature enabling those working abroad to provide debit cards to their beneficiaries back in Africa that will allow these workers more control over how their hard earned money is spent. Nala is also developing a system to allow migrants to transfer their data, including credit history, to the U.S.



Fernandes has also tried to set his startup apart by prioritizing rate transparency, a feature that is uncommon among fintechs facilitating transactions to Africa. For each transaction, Nala displays the exchange rates offered by its competitors, even when those rates are more favorable to the customer. “That automatically builds a new level of trust with the enterprise,” he says. “A lot of the time, even though we don&#8217;t have the best rates, customers still use us because we are transparent and honest with them.” On average, Nala charges higher fees than Remitly, but Fernandes argues his customers stick with Nala for its transparency.



Service has also been a selling point. Hamad Kasoga, a 32-year-old corporate sales representative at Turkish Airlines who lives in San Francisco, California, previously used Remitly to send money home to Tanzania but switched to Nala last November. Kasoga says he believed he would receive better service with Nala, including more efficient problem resolution in his native language, Swahili.



“It was good to learn that Nala’s customer service speaks Swahili,” Kasoga says. “It gives me the flexibility to feel like I’m working with a company that understands and knows me.”



Fernandes says he has tried to keep costs low. “They&#8217;ve built this business without spending a bunch of cash,” Acrew Capital founding partner Lauren Kolodny says approvingly. “They still have a significant portion of their last round of financing in the bank.” One way it keeps costs low: Nala currently has only one employee in the United States, even though it generates more revenue and transaction volume in the U.S. than in any other markets where it operates.

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This African Fintech Is Giving Workers A Better Way To Send Money Home