Nigerian YC-backed startup Anchor comes out of stealth with $1M+ to scale its banking-as-a-service platform TechCrunch
In 2015, the emergence of fintechs such as Flutterwave and Paystack changed the game for online businesses in Africa by making it easier to integrate payments into customer interfaces without building these functions from scratch or bundling with tacky foreign software.
Amplify was another payment platform launched during this period. However, it differentiated itself by committing to payments on social media platforms, which Nigerian digital bank Carbon was interested in when it bought the startup in 2019.
At the time, the startup’s co-founder and CEO, Segun Adeyemi, said he was taking a break and would “probably start another company” later. While working as 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 launch Anchor, another fintech where he is also CEO, in February. The new company is akin to Amplify in terms of infrastructure play; however, it provides financial functions rather than payment functions. Adeyemi launched fintech with Olamide Sobowale and Gbekeloluwa Olufotebi.
“We are now seeing a new development where companies want to offer different products and financial services beyond just payments,” Adeyemi told TechCrunch during a call. “We strongly believe that the way forward is not just by locking banking-as-a-service onto a payment platform, but that it must be a proper banking-as-a-service platform built with the right infrastructure and go-to-market strategy. That’s the problem we set out to solve as a team, basically the complete end-to-end infrastructure for startups to be able 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 valuations and legacy startups like Stripe spinning off similar services. These platforms have become popular among new banks or upstarts in various segments trying to build financial services into their offerings because large, established banks have been relatively slow to bring their services up to speed with the pace of change in the technology and banking world. As such, banking-as-a-service platforms see an opportunity to offer more personalized services and flexibility at lower costs.
The situation is no different in Africa. Despite fintech accounting for over 60% of VC dollars last year and the proliferation of financial services, building a fintech startup is an expensive and lengthy endeavor. Per reports, it can take up to 18 months and an average of $500,000 to launch a fintech on the continent as they deal with issues ranging from licensing and compliance processes and multiple layers of integration to managing third-party relationships and core banking infrastructure.
Anchor wants to “abstract away these complexities” so that pure fintechs and businesses offering embedded finance can get up and running in 5 minutes, Adeyemi said in a statement. “For startups building a full-scale digital bank or offering embedded finance, we can provide compliance coverage that allows them to launch quickly. So from build to embed to launch, our goal is how to do all of this in the shortest possible time without compromising on security, compliance and scalability, that’s our value proposition, he added during the call.
The seven-month-old startup provides APIs, dashboards and tools that help developers embed and build banking products such as bank accounts, money transfers, savings products, issuing cards and offering loans.
Anchor, accepted into Y Combinator’s summer batch this year as the first bank-as-a-service platform from the continent, went live with its private beta in May. Over 30 startups gained access to it, including Pivo, another YC S22-backed company, Outpost Health, Dillali and Pennee. Anchor claims multi-million dollar revenue while growing 200% month-on-month. The startup makes money by charging fees and taking a cut from all billable parts of the business: account issuance, money movements, savings and deposits among others.
After testing these features with a select few, Anchor is coming out of stealth with a $1 million+ pre-seed and making its platform public. Anchor plans to use this investment to attract top talent, improve the company’s technology infrastructure, invest in compliance and regulatory infrastructure, and acquire customers. Investors backing BaaS fintech include Byld Ventures, Y Combinator, Luno Expeditions, Niche Capital, Mountain Peak Capital and angel investors such as SeamlessHR CEO Emmanuel Okeleji.
Meanwhile, Anchor is not the only company trying to simplify how businesses offer financial services in Nigeria and Africa. Other upstarts, such as Bloc, have identified the same opportunity, and larger fintechs such as Flutterwave is also looking to enter that market. Adeyemi argues that the founding team’s technical experience, attention to security and scalability, and the speed with which businesses can go live on the platform give Anchor an edge. While the CEO built 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.
“It’s an understanding of the space as founders and the core team building this. We’ve seen firsthand the painful process of closing banking partnerships, negotiating third-party contracts and obtaining regulatory approvals. And more generally, the extensive time and effort required to launch financial products,” the CEO said.
“We optimize for speed on the market, while at the same time not compromising on security and scalability. So there are a lot of use cases that we’ve built for that if you start from scratch, it will take you 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 is on board, the stronger the infrastructure and support system. Companies also have to consider high switching costs when using BaaS platforms, and for a startup like Anchor, being a first mover is a sustainable competitive advantage, he added.
