Consumer lending platform, Paylater is working on a plan to transition to a full-service digital bank after securing a $5 million debt facility from Nairobi based Lendable.
The financial services company that specializes in consumer lending is looking to deploy new products while transitioning to a digital bank. Since its launch in 2016, the Paylater mobile app has been downloaded by over 1 million users and disbursed over 13 billion Naira. The startup will likely announce a name change to fit its new business in April.
It is a unit of OneFi which started in 2011 as OneCredit, which provided loads to middle-class salary earners, using a paper-based application process that required supporting documentation. However, this restricted the scope of the service in Nigeria, a country where over 60% of working adults are in the informal sector where many people are not paid documented monthly salaries or possessed formal documentation.
According to Quartz, the introduction of the Bank Verification Number (BVN)—a biometric security that links all bank accounts owned by a single user—by the central bank in 2016 enabled young companies like One Credit to launch more flexible, digital lending services available to more people including Paylater.
Chijioke Dozie who cofounded OneFi with his brother Ngozi, believes that the deal with lendable is an international validation of the progress that they have made and their preparedness for the next step. “As we are pushing on with our web and digital platforms, we also want to reach out to a segment in the country that is always talked about but not really catered to”, he explained.
Cofounder of Lendable (which is backed by Omidyar Investments) explained that his company is looking to increase access to finance in frontier markets and wants to do this through non-banking lenders. “Paylater has shown that they know their market intimately while having impressive tech and a platform that is scalable. We are expecting 75% growth within nine months”, he added.
In a few months, OneFi will launch some of its services deploying USSD mobile technologies that can be found in simple feature phones to reach people who are not using smartphones. The company will also announce a partnership with Visa to provide credit via QR codes in supermarkets and clinics.
Nigeria still has an estimated 60% of adults without a bank account and according to the World Bank Global Findex Database report, Nigeria and six countries are home to nearly half of the 1.7 billion people without bank accounts. However, is the next market digital banking?