How Does Kuda Bank Make Money
Kuda Bank is a digital bank that was launched in Nigeria in 2019. It is an innovative bank that provides a range of financial services without any physical infrastructure or branch network.
It operates entirely through its mobile app, which enables customers to open accounts, make deposits, send money, pay bills, and access other financial products and services.
Since its launch, Kuda Bank has gained significant popularity among Nigerians, especially the youth, who are increasingly using digital banking services.
But how does Kuda Bank make money? This question is often asked by people who are curious about the business model of digital banks, especially those that operate without any physical presence.
In this article, we will explore the revenue streams of Kuda Bank and how it generates income.
Interchange fees
One of the main ways in which Kuda Bank makes money is through interchange fees. Interchange fees are levied on every transaction made using a debit card or credit card.
When a customer uses their Kuda Bank debit card to make a payment or withdrawal, the merchant or ATM operator charges a fee to the bank for processing the transaction.
In turn, Kuda Bank charges the customer a small fee, which is typically a percentage of the transaction value. This fee is usually between 0.5% to 1% of the transaction amount. While this fee may seem small, it can add up to a significant amount when millions of transactions are processed every month.
Interest income
Like traditional banks, Kuda Bank earns interest income from the loans it provides to customers.
The bank offers personal loans, business loans, and overdraft facilities to its customers through its app.
The interest rates on these loans vary depending on the creditworthiness of the borrower and the amount borrowed.
Typically, the interest rates charged by Kuda Bank are slightly higher than those offered by traditional banks due to the higher risk associated with digital lending.
In addition to loans, Kuda Bank also earns interest income from the deposits made by customers.
The bank offers attractive interest rates on savings accounts to encourage customers to keep their money with the bank.
The interest earned on these deposits is added to the bank’s revenue.
Account fees
Kuda Bank also generates revenue from various account fees that it charges customers.
While the basic account is free, the bank charges fees for certain services, such as international money transfers, ATM withdrawals, and overdraft facilities.
These fees help the bank cover its operational costs and generate additional revenue.
Investments
Kuda Bank also generates income from the investments it makes with customer deposits.
The bank invests the funds it receives from customers in various financial instruments, such as government bonds, corporate bonds, and stocks.
The returns generated from these investments are added to the bank’s income.
Premium services
One of the most innovative ways in which Kuda Bank generates revenue is by offering premium services to its customers.
The bank offers a range of premium services, such as travel insurance, phone insurance, and zero-fee transactions, for a small monthly fee.
These services are designed to enhance the customer experience and provide additional value to customers while generating revenue for the bank.
