Nigerian Neobank, Sparkle gets $3.1 million in seed investment

Sparkle, a Nigerian Neobank founded by Uzoma Dozie, has earned $3.1 million (over 1.232 billion naira) in a seed investment round today, October 14th, 2021, to scale operations. Sparkle raised $2 million in a pre-seed round from friends and family earlier this year. Leadway Assurance led the round, which also included Trium Network and some undisclosed angel investors.

The goal of neo banks is to help people overcome their dislike for traditional banks. Even though the country’s active bank account numbers are in the millions, issues such as inadequate service delivery, frequent outages, and bad loans have caused many people to distrust banking services. 

Sparkle, which launched in 2020, relies on typical functions like savings, bill payments, top-ups, receiving and sending funds, as well as less common ones like bill splitting and reviewing spending breakdowns, to attract clients in a crowded market.

On the individual banking side, the digital bank claims to have accumulated over 40,000 customers and 2,000 businesses, and in a bid to make money, the company started charging minor fees from individual clients to keep their accounts functioning, and it aims to charge businesses for most products except taxation services.

In an interview, CEO Uzoma Dozie highlighted several Sparkle features that clients may not find on other platforms. Customers can, for example, examine the transaction history with a certain beneficiary without having to go through a financial statement, confirm the place where they made each transaction, and arrange payments without having to go through a financial statement.

Sparkle’s design is also customized to how the majority of Nigerians conduct their daily lives. Customers can use Sparkle to manage numerous accounts (personal and business) and move between them at any time. They can utilize the platform on several phones while maintaining the same level of security as against other platforms that only allow one phone login, according to Dozie.

Sparkle, like the majority of digital banks in the country, has a microfinance bank license. It’s also partnered with Visa to allow customers to utilize their Visa cards to make in-person or digital payments. Network International and PwC Nigeria are two other companies with which the company has partnered.

Dozie remarked, “We’re fairly unusual in that instead of segregating financial services from lifestyle, we’ve attempted to blend them, especially as we’ve noticed that more people are beginning to lead more digitally-led lifestyles.”

“It means we look at our consumers not from the standpoint of  accounts, payments, deposits, or credit, but rather from the perspective of how we can help them do what they want at any given time.” Sparkle’s pitch is to give Nigerians financial, lifestyle, and business support services.

In April, the company launched ‘Sparkle Business’ to acquire a different set of underserved users: small and medium businesses.  With a tax identification number (TIN) and an email address, SMEs can gain access to these capabilities and these are the most basic types of business documentation available. Sparkle says it will use the seed investment fund to develop robotic process automation to assist with dull and repetitive tasks, as well as talent acquisition in engineering, finance, risk, and marketing.

Unlike many other businesses that seek capital from institutional investors, Sparkle’s CEO explained that he chose this group of investors because they were familiar with the Nigerian market and had the experience Sparkle needed to scale. “We are Nigerians who are optimistic about Nigeria and the opportunities the country presents in terms of developing global networks and communities, all via one app,” said the group of investors and business builders.

Dozie was the CEO and last group managing director of Diamond Bank before joining Sparkle. Prior to its merger with Access Bank, he was in charge of the bank’s corporate, commercial, and retail divisions; the company today has 29 million customers. He aims to continue where he left off at Diamond Bank by increasing the capabilities of Nigeria’s banking and retail industries with Sparkle. He attracted an all-Nigerian cast for his seed round as an investor, including lead investor Leadway Assurance, participant Trium Network, and a few unknown high-net-worth people. Sparkle raised $2 million in a pre-seed round from friends and family earlier this year.

While he could have obtained money from overseas investors, he believes he chose this group because they had the knowledge and market that Sparkle requires to develop in Nigeria. He was also interested in enlisting the help of high-net-worth individuals to invest in a tech firm.

In Nigeria, the rising use of technology in banking is proven to be quite beneficial in promoting financial inclusion. This is especially true now that the percentage of people who have access to mobile broadband connections is approaching 50%. Sparkle is using technology to provide Nigerians with not only financial services but also lifestyle and business support.

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