Why We Invested: FairMoney and Africa’s Massive Digital Consumer Banking Upside

WHEN AND HOW DID TLCOM FIRST MEET LAURIN, THE FOUNDER OF FAIRMONEY?

We first met Laurin Hainy, co-founder and CEO of FairMoney, in 2019. He was introduced to TLcom through Lendable in 2019. We then met at our office. This was pre-COVID when in-person meetings were the norm.

At the time, there was a lot of VC activity in digital lending, given the glaring opportunity to target millions of unbanked and underbanked Nigerians. We had met several founders tackling access to finance for individuals and SMEs. They were developing business models and taking different approaches to using technology to solve this critical problem.

Two things stood out with FairMoney. First, the company’s credit scoring solution, which relied on machine learning algorithms applied to device data, was the best we had seen. The granularity of the data that they tracked to train the models and predict credit losses was impressive. Second, Laurin, as a founder. His confidence, ability to think critically and creatively when solving big continent-wide challenges and ambition were compelling.

WHY DID LAURIN CHOOSE TO BUILD FAIRMONEY? WHAT PROBLEM IS THE COMPANY SOLVING? 

7 in 10 adults in Nigeria have a liquidity distress event at least once in a twelve-month period, according to data from EFinA. Formal channels to borrow relatively small sums of money are few and far between, and credit qualification requirements of commercial banks are onerous. Very often, requesting a loan requires the customer to make multiple, often inconvenient, visits to a bank branch. Only 3% of Nigeria’s economically active population – about 100 million adults – have ever borrowed from a commercial bank. Alternative/informal channels are expensive and risky.

The combination of Laurin’s childhood experience and time as CEO of an early-stage VC firm and start-up studio in Paris was the genesis of the initial idea for FairMoney. Having spent his early childhood in Nigeria, he was intrigued by the inefficiency of banks. He recalls a time when he accompanied his father to open a bank account in Benin City. It wasn’t easy! Years later, with smartphone penetration in Nigeria hitting 40%, he believed that a digital-first company offering small, short-tenured and uncollateralised loans to a large, underbanked population via mobile phones was a venture worth pursuing.

WHAT IS THE NATURE OF THE MARKET OPPORTUNITY FAIRMONEY IS ADDRESSING?

Lack of credit access creates serious economic and financial vulnerability for many Africans and is one of the major constraints to the growth of SMBs. McKinsey estimates that Africa’s consumer fintech and financial services market is worth over $150 billion in revenue potential. After South Africa, Nigeria is the continent’s largest opportunity and contributes significantly because of the relative scale of its economy, population and financial institutions. The consumer lending segment has been largely ignored by incumbent commercial banks, but Africa, being a ‘mobile-first’ continent, provides an exciting opportunity to deliver cost-effective digital financial services at scale.

FairMoney was one of the first-to-market microfinance banks in Nigeria, which has given them a competitive edge. They have consistently delivered solid growth metrics and are currently processing over 10,000 loan disbursements a day, with over 5 million users enjoying lending, savings, banking and investment products.

HOW IS FAIRMONEY DIFFERENTIATED?

FairMoney’s true differentiator comes from the company’s rapid execution, which has driven fast growth with excellent metrics. Several other fintechs deliver similar digital financial products across lending, payments, savings, etc., often deploying similar business models to FairMoney. However, the company has proven that it has an uncommon ability to fail fast and innovate even faster.

To execute exceptionally well, Laurin has prioritised hiring great people. His executive and product leaders are impressive and bring valuable experience from multiple global locations and high-growth companies across Africa, India and Europe. FairMoney’s team is laser-focused on customer value and works relentlessly to deliver new products and services well and at scale. Their ambition is to serve millions of Africans, starting with Nigeria.

WHY IS TLCOM EXCITED ABOUT ITS INVESTMENT IN FAIRMONEY?

TLcom’s investment in FairMoney is 100% aligned with our investment thesis. We invest in companies that are leveraging technology and innovative business models to solve a big problem for a lot of Africans.

By first unlocking credit, FairMoney has the potential to open up tremendous opportunities for Africans and African businesses who are desperate for a more functional and enjoyable everyday banking experience. This is bold, impactful and exciting. Laurin’s ambition knows no bounds. But beyond ambition, FairMoney has an excellent execution track record. Particularly in today’s tougher macroeconomic environment, this is a strong validation of TLcom’s central belief that African companies and founders can build to significant value and scale.

FairMoney is now on a journey from a digital lender in Nigeria to a full-service digital bank in Africa for Africans – the African version of Nubank or Revolut. We’re proud to be on this journey with Laurin and his team.