Anchor raises $2.4M to expand product offerings – Anchor, a Nigerian provider of banking-as-a-service (BaaS), recently raised $2.4 million as seed funding. Goat Capital, led by Justin Kan, led the financing round, which also included FoundersX, Rebel Fund, and several existing investors such as Y Combinator and Byld Ventures.
A year ago, the fintech emerged from stealth with over $1 million in pre-seed capital. Its pitch was simple: give APIs, dashboards, and tools to help developers embed and build banking applications. Anchor is one of several BaaS providers in Nigeria, competing in a congested fintech field with JUMO, Maplerad, OnePipe, and Bloc.
In a fast-changing digital banking landscape, incumbent banks have been sluggish in bringing their services up to speed. As a result, these platforms have become popular among neobanks and other firms seeking to integrate financial services into their offerings. Platforms that provide banking-as-a-service now see an opportunity to provide more tailored services and flexibility at a reduced cost. They help these businesses provide bank accounts, payments, savings, and cards.
Anchor collaborates with licensed financial institutions. It believes that doing so, may help firms reduce the time it takes to produce financial products from years to days. When it first debuted, the fintech only catered to customer accounts. Anchor’s APIs, however, now support business accounts, card issuance, bill payments, bulk disbursements, cross-border payments, and developer-only capabilities such as an audit log system and developer webhooks, according to Anchor co-founder and CEO Segun Adeyemi.
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“If you look at the scope of product today, even though there were a few other players that have been in the market before us, there is no one that has the scope of offering that we have in the market today,” the CEO who founded Anchor with Olamide Sobowale and Gbekeloluwa Olufotebi told TechCrunch on a call. “This can be validated by looking at the scope of our offerings and comparing them to what similar companies do today.”
Scaling to serve better
Anchor went live in August of last year, with approximately 30 clients in various stages of onboarding. Its current total is roughly 270, with about 63 of these businesses online and actively trading on the site. Fintechs, SaaS firms, e-commerce enterprises/marketplaces, and other tech-enabled businesses are among its clients. Customers include Bujeti, Pennee, SeamlessHR, LifeBank, Waza, and Zit.ng.
By providing fintech services for these businesses, the YC-backed fintech claims to have earned more than $550 million in annualized total transaction volume (TTV). Similarly, according to the CEO, revenue is increasing by 30% month on month. Revenue is generated by processing fees, account and card issuing fees, and interest income on the float.
Non-digital native enterprises’ online onboarding enhances financial inclusion. As a result, emergent fintechs have focused their services on financial inclusion. Anchor’s initial goal was to facilitate embedded financing for large supermarkets and global corporations in Nigeria. According to Adeyemi, the startup saw a tremendous opportunity to connect these businesses online and fuel their financial service offerings. However, things did not proceed as planned.
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“We realized they weren’t digitally ready yet,” said the chief executive. “We figured that most of them would take three to four years to properly onboard or even get them to the stage where they can maximize their accounts with embedded finance. As a startup, we had to realize we didn’t have the luxury of waiting for customers. So, we had to change and hyper-focus on digitally ready and tech-enabled businesses.”
A big growth channel is being developed
According to Adeyemi, this was one of the most important lessons the market taught Anchor after its first year. Others include assessing suitable pricing, developing revenue sources that positively affect the bottom line of customers, and re-engineering its compliance processes. As a result of this funding, the one-year-old fintech will double its attention in these areas. “We want to improve our end-to-end compliance system, invest in value-added products like our ledger system, and onboard more customers,” Adeyemi noted.
By 2029, the global embedded finance market will be worth $384.8 billion. Anchor estimates that Africa will account for 10% of this business, with a $7 billion addressable market in Nigeria. Anchor could pursue a variety of expansion opportunities in order to gain market share. Above all, it is proud of its recent collaboration with MTN’s fintech department.
Meanwhile, the firm is in the early stages of investigating pan-African expansion, which is one of the reasons Kan, partner at lead investor Goat Capital, is optimistic about the startup. “The embedded finance market in Africa is nascent but growing fast at over 30% CAGR,” said Kan. “Anchor’s growth rate is impressive and showing signs of becoming the category leader, which is something we look out for in our portfolio companies.”
