According to research by global consultancy Simon-Kucher in 2022, fewer than 5% of neobanks were profitable. A recent update suggests that most are still loss-makers, although a path to profitability is emerging.  Also in 2022, Tech Cabal’s reporting on Kuda Bank’s NPLs (non-performing loans) sparked a discussion about what levels make sense for companies doing instant loans. And in a brilliant series of episodes about African neobanks, Afrobility posed a fundamental question: how do you profitably sell financial services to customers traditional banks don’t want (because they’re unprofitable)? It’s an important question because many companies start by delivering a core service—p2p transfers, payments, saving, investment, lending. But as they fight to own the customer and increase market share, they migrate into other areas. We explored that dynamic in the last two episodes about cross-border payments and financial operations. After all, part of the high growth playbook is to dominate a beachhead market and expand into adjacent value added services. And what is the practical realization of that logic in fintech? A neobank, of course. In this episode with Kiiru Muhoya, Co-Founder and CEO of Fingo, “the bank for Africa’s ambitious” and Judith Bongoko, Fingo’s Chief Commercial Officer, we talked about two keys to solving this puzzle: 1) cultivating the next generation of financial services consumers; and 2) strategically partnering with banks. We also chatted about which starting point is the most strategic for a neobank and financial literacy as a workhorse ingredient in the secret sauce of customer retention. Tune in to hear about: [2:05] - Fingo’s mission and key functions of a banking system [7:16] - Fingo’s product journey [15:11] - Early signs of product market fit and best starting points for neobank building [26:42] - Growing the next generation of financial services consumers [33:00] - The yin and yang of partnering with Ecobank [49:14] - Regional dominance as a platform for partnership [57:36] - Fingo’s business model [1:01] - How a bank partnership aligns cost and revenue curves; CAC as a first mover  [1:07] - Navigating competition when “winner takes all” [1:13] - Counterintuitive first principle Recommendations: Chasing Outliers. Why Context Matters for Early Stage Investing in Africa, a report I co-authored on VC investing in Africa  Afrobility has done several excellent episodes on neobanks. They contributed greatly to background research for this episode:#24: Neobanks (African WealthTech Pt 2) - How TymeBank, Kuda & other digital banks are delivering banking services across Africa #34: Kuda Bank - How Nigeria’s most popular Neobank is scaling to offer financial services to “every African on the planet” #68: Branch - From Kiva to providing consumer loans and FinTech services across Africa and other developing markets #69: FairMoney - How the credit-led neobank is providing consumer loans and financial services across Nigeria, India and other developing markets #70: Carbon - How the credit-led neobank is providing loans, BNPL and financial services across Nigeria and Africa #71: TymeBank - How the South African Neobank is integrating digital and physical experiences to provide holistic financial services across emerging markets Connect on social media: Kiiru Muhoya on LinkedInJudith Bongonko on LinkedInKiiru Muhoya on TwitterThe Trajectory Africa on LinkedInTayo Akinyemi on LinkedInTayo Akinyemi on Twitter