South Africa-based fintech Stitch that just evolved out of stealth is reportedly braced with new funding that will enable its desired expansion into the Nigerian market. However, it comes as the subject startup – Stitch announced today that it has successfully added a $2 million seed extension geared towards expansion into Africa’s most populous and economic country.
Based on its official announcement, its entry into Nigeria with the latest seed funding brings its total seed investment to $6 million.
Going forward, investors in this round of funding include existing backers Raba, CRE, Firstminute Capital, 500 Fintech, Village Global, Norrsken, and Future Africa. New investors, classified as executives at global fintechs equally took part. They include Tom Blomfield, co-founder of Monzo and Go Cardless; Matt Robinson, co-founder of Go Cardless; Charlie Delingpole, founder of ComplyAdvantage; and Emilie Choi, president, and COO of Coinbase.
Earlier this year, precisely in February, the startup launched the typical Plaid playbook used by fintech infrastructure entities, understood as a data product that helps developers and fintechs connect their apps to individual users’ financial accounts. Which in the process, helps businesses to access their identities, accounts, transaction history, and balances with users’ consent.
Meanwhile, it’s been observed that African fintechs often rely on card payments systems, while on the other hand, the issues around chargeback fees and fraud costs still linger despite infrastructures that have been put in place by the likes of Flutterwave, Paystack, and Yoco. Hence, Stitch has taken the bull by the horn by addressing these concerns in South Africa, as such, the company is helping businesses process payments better by soft launching its pay-by-bank feature. Which since its soft launch, Stitch claimed it has seen more than 50% month-to-month growth in payments and customer volume across all solutions.
“Once you make the user experience even more frictionless for pay-by-bank, and as tokenizable as card, the choice to use this method over others [particularly for fintechs] is fairly straightforward”, a source familiar with the matter has confirmed.
On the other hand, the company is giving this a different approach, notably the Nigerian market, and this is because, Stitch is testing its payment product instead of its primary data product, and this is based on a compelling case of the payment product in Nigeria after contacting more than 40 fintechs.
This is also based on the fact that Stitch’s market entry (Nigeria) already has an efficient instant bank settlement system with the option to make payment through banks in various fintech applications is relatively standard. But there is a concern, and that is customers making payment via their mobile apps or internet banking app would need to use their mobile banking application to complete each transaction. This is what Stitch seeks to solve, noting that users do not necessarily need to go through that hassle and can initiate once-off, recurring, and user-not-present bank transfers.
Hence, Pillay who co-founded Stitch with ‘Natalie Cuthbert’ and ‘Priyen Pillay’ made clear that, “The opportunity is ripe”. Adding that, “I think more and more API fintechs are recognizing that paying via credit card interchange comes with a high fee when converting customers onto their platform. Just this month alone, we’ve seen our inbound requests increase five- to tenfold here in South Africa, and customers are integrating us in Nigeria even as we were previously still in soft launch”.
As the subject startup position its product in South Africa and Nigeria, the company looks on track to facilitate $10 million in monthly payments by the end of the year, while in the meantime, the company’s clients include Paystack, Chipper Cash, Sanlam, Franc, Yoco, and Flexclub.
Nigeria remains a huge market for these startups, yet a competitive hub. Now the question is, how Stitch intends to acquire customers in an already competitive market where other competitors offer the same payments product! In view of this, ‘Benjamin Dada’ told a source familiar with the matter:
“For a start, we are offering Nigerian businesses who intend to use Stitch free access to the product until the end of 2021”.
Adding that the market is big enough to accommodate multiple players, but acknowledged that the team will try to edge other players by developing “inclusive and sustainable” pricing for its customers. Adding that
“They will not only be achieving cost savings by accepting account payments, but they can now earn a little more for each payment they accept via Stitch
ClinchBase also learned that Dada who founded Nigerian tech publication Benjamindada.com will spearhead Stitch’s operations in Nigeria.
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