Payday, the app that lets Africans abroad send money back home, is reportedly raising a seed round in the middle of a good publicity run for the app, according to people familiar with the matter. According to documents seen by TechCabal, Payday is looking to raise $1.5 million to grow its product and engineering team, expand its operations and get the required licences for those expansions. The app has enjoyed a run of decent publicity in the last few months, making the most of being named one of Starlink’s payment partners for the Nigerian market.
The company has also been marketing its virtual cards, which allow people to make payments for foreign transactions. Currently, many Nigerian banks have a $20 monthly limit on foreign transactions for naira cards. Many bank cards also don’t work for simple things like Spotify subscription payments, opening up a market for virtual cards that make these possible. But virtual card operations can be tricky, and risks abound. Fraud and dealing with chargebacks can make it more trouble than its worth, but they remain an easy channel for customer acquisition.
People familiar with the conversations say that Payday claims to be profitable as of August 2022 and that it hit the 100,000-customer mark later that same year. The company makes money by charging a small fee on transactions (some competitors in the category offer no-fee transfers) and margins on foreign exchange transactions.
Bringing the global money transfer business into focus
While many companies in the “send money back home” category refuse to call themselves remittance companies because of regulatory fears, it hasn’t stopped new entrants from springing up every other day. They mostly style themselves as global accounts for African immigrants and offer undifferentiated services. Their most typical service is helping Africans in the UK, US and Canada send money to Ghana, Nigeria and Kenya.
They differ in whether or not they charge their users fees: Send by Flutterwave, Kuda, and Payday all charge fees, while Afriex, Lemonade Finance and Pesapeer don’t. While these companies differentiate themselves with branding, customers react first to whoever offers the best exchange rates. It creates a situation where it’s sometimes difficult to know who the market leaders are.
While most of these companies hold their numbers close to their chests, market leaders are emerging and there may be consolidations on the cards for those who don’t become market leaders. TechCabal reached out to Payday via email and the company declined to share any comments for this report.
