• Friday, July 12, 2024
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We aim to make cross-border payments as seamless as WhatsApp calls – Oyetayo

We aim to make cross-border payments as seamless as WhatsApp calls – Oyetayo

Ola Oyetayo, Co-Founder and CEO at Verto has a robust background in finance, consulting, and entrepreneurship. In this interview with Zainab Aderounmu, he speaks about the transformative potential of a unified trade currency for African economies and Verto’s tech-driven solution to cross-border payment problems on the continent.

What impact would an effective cross-border payment system in Africa have on African economies and how would that position Africa globally?

The ability of African economies or countries to move money across borders seamlessly, which is a good cross-border payment system, would significantly impact Africa.

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At the moment, Africa’s position is unique, with the free trade agreement in place, which is the Africa free trade continental trade agreement, but there’s no unified currency.

In some other markets where they have free trade areas, one of the first things they do is to have a common currency, because it’s fair to assume that there should be free movements of goods and services, which is essentially what free trade agreements or areas do.

However, there can’t be free movement of goods and services when there’s no free movement of money. And that’s a big structural challenge that we have right now in Africa.

There are 54 countries with at least 44 currencies, on the continent, and there’s no way to effectively move goods and services without being able to pay for them. There are also a lot of capital controls in many countries on the continent, which means that currencies are often restricted, leading to a lack of liquidity, which is a big challenge.

The ability to freely move goods and services and freely allow currencies to trade across the African continent will be very significant.

How is Verto positioning to solve some of these challenges to facilitate cross-border payments among African countries?

When we started Verto, we realised there were four big challenges with payments across Africa. One is liquidity, the fact that some currencies are not liquid, there’s a lot of demand for hard currencies but the local currency doesn’t have enough hard currency to support it.

We also realised that there was extreme friction with settlements, so sometimes it could take up to a week to settle money across African countries which is also very expensive. The real-time cost of moving money across Africa is between 7 percent to 14 percent of the value if you’re moving funds across markets, but in developed markets, it’s being brought down to between 1 percent to 3 percent.

There’s a huge disparity in terms of cost and then concern over the safety of funds. Knowing these, we created a tech platform that helps businesses move money across borders, and solve the unique aspects of the problem.

Concerning liquidity, we have something called the Marketplace on Verto, where we match buyers and sellers of specific currencies to buy and sell, and that’s been very useful because they are all vetted, counterparties and customers that we’ve gone through a compliance process with, which has helped the trust angle. We’re a fully regulated financial institution. Dealing with us means that, you know, and we adhere to very high standards.

For settlements, we have about 26 different bank partners and payment service partners across the world, which means no matter where you want to move money in the world, we can provide a local solution to do payment terminations, and also a local solution to receive and that has significantly reduced settlements time from about a week to less than 24 hours.

In terms of expense, because we have a tech platform, the variable cost is low for us, so we passed that cost on to our customers which made it cheaper. Verto also offers 49 different currencies on the platform meaning that we have partners that allow us to transact in and out of these 49 different currencies.

For example, if a Kenyan business wants to make payments in Nigeria, we help that business convert its Kenyan shillings to Naira via all the intermediaries that we work with. So in Nigeria, we’re an international money transfer operator with a business exemption so we can terminate Naira into the country if the customer in Kenya pays in Kenya shillings via a local payment method.

Then a conversion rate on Verto converts that to Naira, and it accepts that and makes the payment. In the background, through our network of banks and liquidity partners, we directly convert that, taking the load off that customer in Kenya to be able to do the payment and conversion.

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Beyond 49 currencies and partners across the world. What progress has Verto recorded through facilitating cross-border solutions for businesses in Africa?

At the moment, we are recording about a billion dollars a month in transaction volume across the markets we’re in. We’ve been around for about five and a half years. As a U.S. entity with operations in the UK, we also have licenses in Nigeria, South Africa, and Kenya. We’re about to be licensed in the UAE and also in the EU as well.

It’s also a tech-first platform. We have a world-class payments platform which allows businesses to interact seamlessly, and we also recently launched an app which has been taken up very well across the world.

Beyond the challenges associated with cross-border payments, what opportunities exist in the landscape, and how is Verto taking advantage of these opportunities to expand?

About 92 percent of intra-Africa trade is domiciled in US dollars, which is an opportunity for cross-border payment providers to offer genuine interoperability between African currencies. Businesses also always need to make payments for imported goods and supplies abroad, and that’s a huge opportunity for us as well. There’s a huge opportunity to use technology to solve challenges.

The idea is to make cross-border payment as easy as it is for people to place WhatsApp calls now across borders, making this very safe, convenient and fast.

Also, the thesis of the free trade area in Africa is very strong. The concept of having all these countries be able to move goods and services freely across their borders is noble, and that’s an opportunity as well. So beyond moving goods and services, how do we also make sure that we can move the money that people would use to pay for these goods and services seamlessly.

The demographic dividend of Africa is also an opportunity. It’s such a young continent, with the median age at about 19. There’s a high take-off rate when it comes to technology. Mobile Money, for example, has been ubiquitous on the continent for a while. And that feeds into the tech narrative.

How is Nigeria positioned, as a major economy in Africa, to solve the problems of cross-border settlements?

Nigeria has world-class financial services institutions and also world-class telecommunications institutions. So, finance and technology are things the country does very well, and also, it’s a huge remittance market. According to the World Bank, there was about $21 billion worth of remittance into the country in 2023, the eighth-largest remittance corridor in the world. A lot of people know that is severely inaccurate because a lot of funds flows are informal. So, I would say, the remittance flow into the country should be closer to $50 or $60 billion which shows the size of the market.

There’s a strong, vibrant diaspora community. Nigerians are probably some of the most well-travelled, strong, professional service-type folks in the diaspora remitting funds home for various reasons. It’s a big market when it comes to remittance, also a big market when it comes to imports as well.

Anyone in the cross-border pavement space sees that as a sweet spot. Many businesses in the country want to pay for goods and services abroad. There’s a significant market and opportunity for folks in this space. Also, there’s a lot of increased intra-Africa trade between Nigeria and its neighbours like Cameroon, Ghana, and South Africa. If you think about how well-positioned the country is, it’s a good sweet spot for cross-border payment. It’s a market that we take very seriously.

What is Verto doing to expand to cover more businesses and have a wider market reach?

We’re currently working on a card product at the moment. We realised that when it comes to expense management or folks paying for goods and services online, unfortunately, in Africa, there aren’t many options because historically, it’s been hard to have foreign-based cards. We’re working on offering multi-currency cards to African businesses. We do that already in the West, and we’re trying to ensure we offer that on the continent.

It means you can pay for a Netflix or an AWS subscription. If you’re a business, when your directors or senior staff are travelling, you have a card linked to your business account that you can utilise as well. We also realised that Africa is a mobile-first market, so we’ve also made some changes to our app, and launched it recently, about two or three weeks ago.

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How can Verto enhance more remittance inflows, and ensure that the actual value of remittances is captured?

We are currently an international money transfer operator in Nigeria, which means we can send funds in, and most importantly, we have a business exemption. We’re not a consumer remittance company. We do business payments, which means that we help businesses send funds into the country.

If individuals can do about $21 billion in diaspora remittances, imagine how much businesses outside the country want to transact. Typically, business payments have more magnitude than personal payments. The ability to capture business payments into Nigeria and do that through the revenue terms window will be quite significant.

And that’s why I think India does about $100 billion annually. If Nigeria can sort of add business payments into that, that would be quite significant. Also, there are a lot of informal remittances, mostly because there’s not much in terms of price discovery, coupled with the trust component. Offering a trusted platform where folks can make payments is important. We can ensure more remittance flow is captured into the country. The central bank is very keen on ensuring that, more remittance is done through official and formal channels, and they’ve been very supportive by unifying the exchange rates and creating policies to ensure we can bring more of these flows into the formal channels.

We’re keen on helping out with that and we’ve also started doing some work on that. Ultimately, the more remittance flows captured in the real data that goes through banks and the Central Bank, the stronger the naira would be because there will be enough hard currency inflow to help offset the demand for it.