Firm's cheaper, seamless solution to cross border pay services nightmare

While operating from the United Kingdom, entrepreneurs Ola Oyetayo and Anthony Oduu encountered challenges in sending money to their associates back in Africa; this impeded the growth of their business.

Most of the available cross-border payment service providers would charge high transaction fees that affected their profitability. These fees ranged between three and five per cent of the transaction value. 

The available payment solutions were also very slow, as service providers had not specialised in offering cross border payment services, leaving the entrepreneurs in need of a quicker solution.

“In markets such as Nigeria and Kenya, businesses that transacted large amounts of money would have to wait up to 24 hours to receive payments, while in less advanced markets, this could go up to seven days,” noted Mr Oyetayo in an interview with Powering SMEs.

The entrepreneurs also discovered that businesses trading in key African currencies encountered strict foreign currency transaction limits, which limited their growth and access to international markets.

In 2017, while unwinding over a regular game of poker, the two friends resolved to create a solution dubbed Verto, that would simplify cross-border payments in emerging markets, particularly Africa.

They quit their jobs, then approached some venture capital investors to support them in bringing this new idea to life.

Some of the investors included Quona Capital, Accion, Middle East Venture Partners, P1 Ventures and TMT Investments. Leveraging on their backgrounds in technology and finance, they set out to work.

Cross-border payment services

“There was significant opportunity within core target markets in Africa which on average record transactions of about $4.1billion (Sh541.2 billion) annually,” noted Mr Oduu, co-founder of Verto.

The Business-to-Business payment service would target registered businesses that needed to collect, convert or send payments with either global offices, customers or those that handled multiple currencies in their operations.

It would incorporate multi-currency wallets to enable businesses to freely convert and send payments in up to 50 currencies including the Indian Rupee, Japanese Yen, Chinese Yuan among others.

To achieve this, the company established partnerships with financial institutions in major trade markets across the globe, as well as those in Africa.

“We designed products that would specifically facilitate large value cross-border payments and foreign exchange for companies doing business in Africa,” stated Mr Oduu.

It is estimated that the African diaspora sends over $50 billion (Sh6.6 trillion) back home every year and loses up to $3 billion (Sh396 billion) in high foreign exchange rates and hidden fees when sending money back home.

With this in mind, the entrepreneurs’ market entry strategy was to deliver a solution to cross-border payment services at a much more subsidised rate.

“Between quarter one and quarter three of 2023, Kenyan banks made $151 million (Sh19.9 billion) out of foreign exchange transactions. We built our own unified payment network to cut out intermediary complexity and fees, settling up to five times faster than traditional methods,” noted Oduu. 

They realised that challenging institutions that had been operating in the market for years was not going to be easy, and they had to do more than simply launch a good product to succeed.

Notable growth metrics

“Cross-border payment platforms are still new in the regions we target. It is challenging getting into a market where most businesses do 90 per cent of the payment processing with banks,” noted Mr Ola.

Getting regulatory approvals in some of the jurisdictions that they were looking to venture into was also a challenge, as was the volatility of currencies in these emerging markets.

“The fluctuation of currencies slows the business in various aspects in the market, and this being a recurring issue in Africa, we have had to constantly review our model to come up with a solution,” noted Ola.

It has now been seven years since the firm began its operations in Africa and Kevin Ng’ang’a, the country director of Verto Kenya, says that over time, they have managed to gain a better grasp on the market.

Some of the notable growth metrics include facilitation of large value cross-border payments and foreign exchange transactions for more than 2000 companies doing business in Africa.

“We have facilitated payouts to more than 170 countries, settling international payments in 27 different currencies and domestic accounts in 5 currencies including the US dollar, Euro, Sterling Pound, Nigerian Naira and Kenyan Shilling,” said Ng’ang’a.

“Our revenues have grown up to four times, thanks to the clients acquired in these new markets,” posed Mr Ng’ang’a.

The firm, which currently employs more than 100 employees in the various markets it operates in, is looking to venture into more jurisdictions within Africa, so as to facilitate Intra-Africa cross border payments for businesses trading under the Africa Continental Free Trade Area (AfCFTA) market.

“This move will not only spur cross-border trade, but potentially enable us to grow our revenues 13 times over, in Africa alone, by 2030,” noted Ng’ang’a.

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