In this interview, The Kenyan Wall Street‘s Brian Nzomo sits with Kevin Ng’ang’a, VertoFX’s Kenya Country Manager on how the fintech is designing solutions for businesses within and outside the continent, and the sticky challenges at play.
The latest report by the UN Economic Commission for Africa (ECA) reveals that Africa’s contribution to global trade stands at less than 3% due to similarly low figures in intra-African trade and a variation in financial infrastructure.
- To facilitate cross-border financial transactions, business owners in Africa have to convert their local currencies into dollars; and depend on costly and time-consuming processes that minimize trade volumes.
- Dollar shortages, unstable exchange rates, and forex controls by African governments can further complicate the trading process as businesses lack necessary liquidity to finalize transactions.
- These challenges have resulted to the emergence of disruptive innovators in the African market whose platforms streamline financial transactions across borders as the demand for intra-African trade rises.
VertoFX, a global fintech, provides a platform for entrepreneurs to access much-needed forex liquidity for cross-border payments. It has partnered with over 26 global banks across 170 countries to facilitate the conversion and settlement of 49 different currencies.
“We focus on African businesses primarily to help them grow in terms of global trade. We use our proprietary platform that is connected to over 20 global banking partners that facilitate multi-currency wallets, global accounts, payment solutions, and API connectivity that will help both large corporates, medium-sized corporates, and small businesses fund their accounts to make payments globally,” Kevin Ng’ang’a, Kenya’s Country Manager for VertoFX, told The Kenyan Wall Street in a recent interview.
VertoFX was founded in 2018 by Anthony Oduwole and Ola Oyetayo in the United Kingdom (UK). In 2021, the fintech raised US$10 million in its Series A round to expand to other key markets, including Kenya and South Africa. The funding raise was led by Quona Capital and supplemented by the Middle East Venture Partners, Treasury Ventures, Unicorn Growth Capital, and P1 ventures.
VertoFX has grown remarkably over the last five years, from processing transactions worth US$20 million every month to their current figure which stands at US$1 billion every month across all their markets. The East Africa region accounts for 13% of VertoFX’s transaction volume.
“The growth has not only been in transaction volume but we have also seen growth in understanding new markets, how to get into the market, and what it is to work with our partners,” Ng’ang’a said.
According to Verto’s research, 92% of intra-African trade is challenged by inefficiencies brought about by currency complexities that persist in the continent. This, in the long run, diminishes the capability of SMEs to scale up operations and broaden their operations beyond the borders.
For banks, partnering with VertoFX primarily helps them to enter regional markets they were absent in initially. Global banks that may not have the impetus to establish an active presence in Africa due to lofty regulations still benefit from transaction volumes in the continental market. Ng’ang’a considers this partnership with banks as ‘symbiotic’.
“The banking partner benefits in two ways. One, we open for them new markets in a well, safe, and regulated business because our parent license is in the UK – which has a very high standard of regulations,” Ng’ang’a, who has 20 years of experience and expertise in treasury, financial, and risk management, said.
“The other thing is…the banking partner will charge a fee so they generate income from the payments that we make through their banking network. Emerging market banks also benefit from cheap deposits due to our transaction volume,” he added.
There are, of course, challenges
Unlocking cash flow across African countries is an elaborate way of creating uninterrupted supply chains among businesses. However, VertoFX’s goal in making this a reality is not without its array of challenges. The lack of standardized regulations across different markets as well as the time-consuming processes needed for approvals to be made have hampered expansion. The unpredictability of government policies is also a deterrent for VertoFX‘s entry into some markets.
“At the basic level, the common law and laws governing contracts are very different. You will find that you need to be able to engage very many different consultants to understand the law. The other challenge is the difference of cyber security laws between different countries,” said Ng’ang’a.
Over the last decade, Africa’s startup ecosystem has grown considerably. Most of the formidable innovations are e-commerce platforms that are stationed across different countries thus in dire need of reliable fintechs that will simplify cross-border payments.
VertoFX has launched pay-by-links and virtual cards to further ease customers’ payment processes. The fintech is also working on improving its API to allow other fintechs and banks to access new currency pairs especially in the Asian market.
“I think one of the challenges that I have seen with fintechs is the inability to take time to understand the problem they are solving. There are certain nuances that each market and you don’t need to solve for everything at the same time, without being good at one thing. You also need to understand the ability of people to pay for your product within your market,” Ng’ang’a said.
