Ola Oyetayo, CEO/Co-founder, of Verto, a London-based business-to-business cross-border payment and foreign exchange enabler for startups, in this interview with BusinessDay’s Chinwe Michael, shares details about its acquisition of a quarter of Silicon Valley Bank’s (SVB) customers in Africa and the MENA region following the American bank’s collapse. Excerpts:
Verto recently launched a USD account to protect startups’ funds up to 100 percent. What exactly does that mean?
Unlike SVB, Verto has taken an unprecedented step to support startups and enterprises in the African ecosystem by offering safeguarded USD accounts with up to 100 percent protection. These funds are ring-fenced and forbidden from being lent out, which is in contrast to the practice of traditional banks.
This enhancement offers levels of protection not seen before for African startups, enterprises, and venture capital that hold international currencies and ensures that their finances are always safe, secure, and accessible, despite the wider financial environment.
However, the SVB crisis ringfences customers’ funds separately from Verto’s balance sheet so that in the unlikely event, the customer’s funds are not at risk and they are able to access their funds according to the process set out by the regulator. These safeguards are why giants such as MTN, Interswitch, and Maersk have us as trusted partners.
Given the current global economic meltdown, which is also affecting every tech company, is it possible for a startup to hedge its fund 100 percent? What would they need to do for that to happen?
While global economic challenges have hit the banking sector hard in some instances, they have also highlighted the positivity that comes with moving with speed and listening to the market.
The collapse of SVB led many African startups to review their banking options. Founders and investors are said to hold funds in multiple bank accounts across big financial institutions that are generally considered safer. They are also leveraging fintech firms that have more extensive Federal Deposit Insurance Corporation (FDIC) protection.
We were able to move quickly to create an expedited sign-up and onboarding process for customers potentially affected by the SVB collapse and others that had accounts in other institutions but were still worried about the security of their funds.
Unlike SVB, Verto has taken an unprecedented step to support startups and enterprises in the African ecosystem by offering safeguarded USD accounts with up to 100 percent protection
The Global USD accounts set up by Verto and its banking partners are 100 percent ring-fenced so that in the event of an unlikely shock, they are fully protected from losses.
Safeguarded accounts are commonly used by UK financial institutions and bodies to protect UK-based customers by ring-fencing their funds from financial shocks. Verto has extended these accounts to other international currencies, regardless of the customer’s country of incorporation.
Designated safeguard accounts with accredited banks in the UK, and neither our platform nor the banks can claim the funds in these accounts. Meanwhile, funds protected under safeguarding obligations do not attract interest payments, unlike funds in typical insured accounts.
Your business is heavily dependent on dollar transactions. Have you been affected by the rising interest rate this year?
An increase in the interest rate would cause the value of a currency to rise. Essentially, this is because higher interest rates in a particular currency offer investors (those who buy a currency) a higher return relative to other currencies.
In an idealised example, when interest rates rise, investors are attracted to a currency and invest more heavily in it. As more investors are attracted, demand for the currency increases, and its value goes up.
Business owners who operate using our platform can send cross-border B2B payments at foreign exchange rates up to nine times cheaper than they could through traditional banks. And most importantly, without a fee.
A no-fee proposition has caught on well with a user base of over 2,000 businesses, each transacting an average of $30,000.
While we service a lot of businesses requiring access to USD and other G10 currencies, we are sufficiently diversified to avoid the shocks from the general rate hikes, which have largely been introduced to curb inflationary pressures.
Verto trades 50 currencies, including USD, GBP, NGN, and KES in 170 countries and transacts in line with market movements. This largely shields our operations from interest rate hikes. We also work very hard to ensure our operations remain as lean and efficient as possible while delivering better service for our customers.
You raised $10 million in a series A funding in 2021 for geographical expansion. How many countries are you in now? Are you planning on cutting back or expanding more this year?
We raised a $10 million Series A funding round led by Quona Capital, alongside The Treasury, Middle East Venture Partners (MEVP), TMT Investments, Unicorn Growth Capital, Zrosk Investments, and P1 Ventures. We used the investment to continue building our platform and accelerate its geographical expansion into other emerging markets in Africa.
Verto currently has a footprint in 20+ countries through our own local entities and partnerships. We recently received regulatory permission to offer our services in South Africa and Kenya, and we are currently focused on bringing our world-class cross-border payment capabilities to businesses in these markets.
We have experienced a spike in demand following the collapse of SVB, with over 1 in 4 of their African customers requesting to sign up with Verto. It was nice to be recognised by TechCrunch. However, we already served over half of Africa’s tech unicorns before the crisis, and we will look to continue to expand.
Being a global cross-border payment platform, how well do you rate your market penetration since launch?
As a Y Combinator-backed company with some of the same investors as Stripe, 100+ staff in 20 countries, and trading 50 currencies across 170 countries, we are excited about our market penetration since launch in 2018,
Since our launch, we have been able to establish over 3,000 clients, including MTN, Yoco, and Interswitch. Our clients can hold funds in their Verto accounts in up to 51 currencies. Nonetheless, we have not only increased our customer base but have also grown 70 percent in transaction volume to $3 billion year-on-year.
However, we expect to triple this volume within the next 12 months after carrying out some expansion plans as well as product launches.
We are not resting on our laurels. Our total addressable market is an annual revenue pool of $4 billion so we still believe we are only scratching the surface of the potential that lies in cross-border payments across the African continent and we are working very hard to deliver on the potential which the founders, investors and employees believe exists in the Verto platform.
Do you plan to raise new funding? If yes, are you concerned about VCs’ reluctance to fund startups which led to a sharp decline in total Q1 investment?
Being a capitalised startup, backed by the Y Combinator, this enables us to have the ability to seek external funding when we require it, irrespective of the decline in VC funding over the past few months.
According to a Q1 report by Disrupt Africa, startups raised $649 million between January 1 and March 31 this year, compared to $1,5 billion reported in the same period in 2022. Despite the decline, companies are still being funded, especially when investors see that such startups are able to generate a return for them.
Also, we have always focused on building a company with a great product to service our customers, and we believe that in the long run, this always attracts the right type of investor.
While the payment market in Nigeria is seeing more adoption many still believe that fintech companies and banks are lack capacity to meet demand, why do you think this is so and what is the way forward?
The CBN took a very bold and laudable step in advancing its cashless policy and taking both consumers and businesses into an important phase of digitising the economy. As we know though, these sorts of big steps are not without challenges and it would appear that the banking partners were not fully prepared for the pent-up demand in the market.
These projects can take a while to plan and execute, and even with the best-laid plans, issues can still arise. What has been encouraging has been the speed with which some of these issues have been resolved and how Nigerians have adapted. As the regulator continues to engage with its partners in the payment space to boost infrastructure capacity, these sorts of technical issues will surely become a thing of the past.
What are the milestones you have recorded in the market so far? What should the market expect from you?
Our B2B global payment industry is expected to grow to about $200 trillion by 2028, and Verto plans to accelerate its geographical expansion into more markets in Africa and the Middle East.