Kuda bank became quite the phenomenon with its disruptive entrance into the market. The bank snuck its way into the hearts of Nigerians with the promise of free banking and with the recurrent economic crisis in Nigeria.
Nigerians who had become fed up with the incessant and ever-increasing charges from the traditional banks gladly migrated to Kuda; the digital bank that seemed to deliver on its promise of freedom. For the first time, bank charges were free; Debit card was free and delivered to your home at no cost; Card maintenance fee was free; Account maintenance fee was also free and a promised 15% annual interest rate as opposed to 4% for the traditional banks.
As if this was not great enough, Kuda bank also introduced an overdraft policy that afforded the average Nigerian access to short-term loans at a very low-interest rate making them stand out in the financial sector as the traditional banks failed in this regard with their tedious process and high-interest rate.
Steadily, Kuda captured the minds and hearts of Nigerians particularly the youths as they made banking seamless and brought ease and convenience that no other bank offered. Kuda bank’s strategy seemed to work because from March 2021 to July 2021, Kuda bank had grown from 650000 users to a whopping 1.4 million users. Kuda bank reportedly continued to spend heavily on marketing, expansion, and increasing their workforce to effectively cater to their increasing customers.
At the end of 2021, Kuda had crossed the 2 million customer milestone barely 6 months after their one-millionth customer and had won a banking award for their outstanding performance. They had also become the 7th most valuable bank in Nigeria at a $500million valuation.
In July 2022, Kuda bank informed its customers that it will implement bank charges of 50 naira for every deposit of 10000 naira and above, in accordance with the Central Bank directive. This came as a surprise and raised some eyebrows but 16th September 2022 came with a much ruder shock as Nigerians woke up to the news that Kuda Bank had lost over 6 billion naira at the end of 2021. Worse still, upon a deeper look, Kuda had also lost nearly 900 million naira in 2020. How did Kuda bank go from a seemingly high-performing bank to these outrageous losses? How did the bank that prided on freedom find itself in the chains of losses? The news sparked serious concerns that led to a trending conversation on Twitter as Nigerians wasted no time in reacting to the news.
Generally, there were two (2) major and very distinct opinions on the Kuda Bank loss; The Critics and The Optimists.
The critics came from the standpoint that Kuda bank’s failure was imminent as their entry strategy was not sustainable. Also, Kuda had spent a ton of money on marketing that they considered unnecessary making it hard for them to thrive. In addition, the overdraft policy should never have been implemented without stringent conditions as most Nigerians were bound to abuse the privilege. They also stated vehemently that any business in Nigeria could not survive without some level of selfishness and Kuda’s loss would serve as a big lesson to upcoming startups not to implement the same strategy.
The optimists however argued that for every start-up that dares to do what has never been done before in the manner in which Kuda Bank has done, the loss was expected at least in the first few years before the bank can break even. They expressed optimism for the future of Kuda Bank and concluded that ignorance was the only reason why this news would spark a lot of criticism and backlash or even damage the reputation of the bank.
What is the future of Kuda Bank?
One can’t help but wonder how this news would impact Kuda Bank now and in the years to come. Perhaps, there is a need for the bank to re-strategize so they can break even. But how long would that take? Should their customers be worried? According to Techcabal, Kuda Bank had reportedly spent over 1 million dollars on marketing and continued to spend more money, hiring new staff but at the end of 2021, had to reduce staff strength. Clearly, something was wrong and was not working.
The biggest pitfall appears to be the Overdraft policy and this failure isn’t farfetched. What is the moral credibility of an average Nigerian to repay loans? Traditional banks maintain strict conditions on giving out loans and maybe Kuda Bank might just want to reconsider this policy and put in more stringent rules that lower loan risk and protect their assets.
We cannot wait to see how Kuda Bank will navigate through these losses. Would it take a year? Two or three? Is this a mighty fall? Or a minor setback for an even greater comeback? Please leave your thoughts in the comment section.