In 2015, the rise of fintechs like Flutterwave and Paystack changed the game for online businesses in Africa by making it easier to integrate payments into customer interfaces without building those features from scratch or merging them with tacky foreign software.
Amplify was another payment platform launched during that period. However, it distinguished itself by committing to payments on social media platforms, which Nigerian digital bank Carbon was interested in when it acquired the startup in 2019.
At the time, the co-founder and CEO of the startup, Segun Adeyemic, said he was taking a break and would “probably start another business” later. While working as a country manager in Nigeria for JUMO, a South African fintech that provides credit infrastructure to major mobile money operators across Africa, Adeyemi quit last year to anchor, another fintech where he is also chief executive, in February. The new company is akin to Amplify in terms of infrastructure play; however, it offers financial functions instead of payment functions. Adeyemi launched the fintech with Olamide Sobowale and Gbekeloluwa Olufotebic.
“We are now seeing a new development where companies are looking to offer products and financial services other than just payments,” Adeyemi told londonbusinessblog.com during a phone call. to lock down a payment platform, but that there must be a good banking as a service platform built with the right infrastructure and go-to-market strategy.That’s the problem we as a team decided to solve, in fact the complete end-to-end infrastructure for startups to build, embed and launch financial services.”
Banking-as-a-service (BaaS) platforms are one of the hottest segments in the global fintech space, with upstarts like Unit and Rapyd hitting unicorn ratings and older startups like Stripe delivering similar services. These platforms have become popular with neobanks or startups in various segments trying to embed financial services into their offerings, as large, established banks have been relatively slow to adapt their services to the pace of changes in the world of technology and banking. As such, banking-as-a-service platforms see an opportunity to provide more personalized services and flexibility at a lower cost.
The situation is no different in Africa. Despite fintech accounting for over 60% of VC dollars and the proliferation of financial services last year, building a fintech startup is an expensive and lengthy undertaking. According to reports, it can take up to 18 months and an average of $500,000 to launch a fintech on the continent as they face issues ranging from licensing and compliance processes and multiple layers of integration to managing third-party relationships and key banking infrastructure. .
Anchor wants to “remove this complexity” so that pure fintechs and companies offering embedded finance can be up and running within 5 minutes, Adeyemi said in a statement. “For startups building a full digital bank or providing embedded finance, we can provide compliance coverage that helps them get started quickly. So from build to embed to launch, our goal is how we can do it all in the shortest time possible without sacrificing security, compliance and scalability. That’s our value proposition,” he added.
The seven-month startup offers APIs, dashboards and tools that help developers embed and build banking products such as bank accounts, wire transfers, savings products, card issuance and loan offerings.
Anchor, accepted in Y Combinator’s summer batch this year as the continent’s first banking-as-a-service platform, went live in May with its private beta. More than 30 startups have had access to it, including Pivo, another YC S22 backed company, Outpost Health, Dillali and Pennee. Anchor claims to trade several million dollars while growing 200% monthly. The startup makes revenue by charging fees and taking discounts on every billable part of the business: bill issuing, money movements, savings, and deposits, among others.
After testing these features with a select few, Anchor comes out of stealth with a $1 million+ pre-seed and makes its platform public. Anchor plans to use this investment to attract the best talent, improve the company’s technical infrastructure, invest in compliance and regulatory infrastructure, and acquire customers. Investors backing the BaaS fintech include Byld Ventures, Y Combinator, Luno Expeditions, Niche Capital, Mountain Peak Capital, and angel investors such as Emmanuel Okeleji, CEO of SeamlessHR.
Meanwhile, Anchor isn’t the only company trying to simplify how businesses provide financial services in Nigeria and Africa. Other upstarts, like Bloc, have identified the same opportunity, and bigger fintechs like Flutterwave are also looking to tap into that market. Adeyemi says the founding team’s technical experience, attention to security and scalability, and the speed with which companies can go live on the platform give Anchor an edge. While the CEO was building Amplify, the startup’s CTO, Sobowale, worked at four prominent Nigerian fintechs: AppZone, TeamApt, Kuda and Carbon, and Olufotebi was a full-stack developer at Booking.com, where he built financial operations software.
“There is an understanding of the space as founders and the core team that builds it. We’ve seen firsthand the painful process of building banking partnerships, negotiating contracts with third parties, and getting regulatory approvals. And more generally, the extensive time and effort required to bring financial products to market,” said the CEO.
“We optimize for the speed at which we go to market, while at the same time not compromising on security and scalability. So there’s a lot of use cases that we’ve built for that if you’re starting from scratch, it’s going to take a while to get up and running.”
The CEO also pointed out how Anchor has created a network effect with its service, where the more platforms it has on board, the stronger its infrastructure and support system. Companies also have to factor in high switching costs when using BaaS platforms, and for a startup like Anchor, a first mover is a sustainable competitive advantage, he added.