In this article, we will explore the recent funding round of Nigerian fintech company Anchor, which secured $2.4 million in seed investment. Led by Justin Kan’s Goat Capital, the financing round also attracted participation from FoundersX, Rebel Fund, and existing investors such as Y Combinator and Byld Ventures. Anchor, a banking-as-a-service (BaaS) provider, aims to revolutionize the Nigerian fintech landscape by providing APIs, dashboards, and tools to assist developers in embedding and building banking solutions.
Introduction to Anchor’s funding round and investors
Anchor recently raised $2.4 million in seed investment. The financing round was led by Goat Capital, with participation from FoundersX, Rebel Fund, and existing investors including Y Combinator and Byld Ventures. With this injection of funds, Anchor intends to expand its product offerings and consolidate its position in the Nigerian fintech market.
Anchor’s proposition as a BaaS provider in Nigeria
As a banking-as-a-service provider, Anchor offers APIs, dashboards, and tools to developers, enabling them to embed banking solutions into their own products. With Anchor’s platform, businesses can provide bank accounts, payments, savings, and cards to their customers. Anchor’s focus is on personalized services and flexibility, with the goal of providing these services at a lower cost.
Competition in the Nigerian fintech space
The Nigerian fintech market is highly competitive, with several players vying for a share of the growing sector. Companies such as JUMO, Maplerad, OnePipe, and Bloc are also operating in this space. However, Anchor believes it stands out due to the scope of its product offerings, which surpass those of its competitors.
Opportunities for personalized services and lower costs in banking-as-a-service
With the rise of embedded finance platforms like Anchor, there is an opportunity to deliver more personalized services and flexibility at a lower cost. By partnering with regulated banking institutions, Anchor claims it can help businesses shorten the process of building banking products from years to days. This opens up possibilities for businesses to provide a wide range of financial services to their customers.
Anchor’s partnership with regulated banking institutions
To ensure compliance and regulatory adherence, Anchor has formed partnerships with regulated banking institutions. By leveraging these partnerships, Anchor can offer its customers a more secure and reliable banking experience. This collaboration also helps Anchor streamline its operations and focus on providing innovative solutions to its clients.
Expansion of Anchor’s product offerings
Initially focused on customer accounts, Anchor has expanded its product offerings to include support for business accounts, card issuance, bill payments, bulk disbursements, cross-border payments, and developer-only features. This expansion allows Anchor to cater to a wider range of clients and provide them with a comprehensive suite of financial services.
Anchor’s Product Offerings
Initial focus on customer accounts
When Anchor first launched, its primary focus was on providing customer accounts. This allowed individuals to access banking services through Anchor’s platform. By starting with customer accounts, Anchor was able to establish a solid foundation and gain traction in the market.
Expansion to support business accounts
Recognizing the need to cater to businesses as well, Anchor expanded its product offerings to include support for business accounts. This allows companies to manage their finances and perform transactions seamlessly through Anchor’s platform. By offering business accounts, Anchor has tapped into a new market segment and increased its customer base.
Card issuance
Anchor’s platform also supports card issuance. This feature allows businesses and individuals to access branded debit cards that can be used for various financial transactions. By offering card issuance services, Anchor adds convenience and flexibility to its overall product offerings.
Bill payments
Anchor’s platform enables users to make bill payments conveniently. Whether it’s utilities, subscriptions, or other recurring payments, Anchor provides a seamless solution for managing and paying bills. This feature caters to the needs of both individual and business account holders.
Bulk disbursements
With Anchor, businesses can easily make bulk disbursements to their employees, contractors, or suppliers. This feature simplifies the process of managing and distributing funds to multiple recipients, saving time and resources for businesses.
Cross-border payments
Anchor’s platform supports cross-border payments, allowing businesses and individuals to send and receive money internationally. This feature facilitates global transactions and provides users with a cost-effective and efficient solution for cross-border payments.
Developer-only features
Anchor offers developer-only features such as an audit log system and developer webhooks. These features give developers greater control and visibility into the inner workings of Anchor’s platform. By providing these tools, Anchor empowers developers to build innovative and customizable solutions.
Anchor’s Clientele and Performance
Number of clients and active transactions
Since its launch, Anchor has steadily grown its client base. It started with approximately 30 clients in various onboarding phases. Currently, Anchor serves around 270 clients, with approximately 63 of them actively transacting on the platform. This growth indicates the increasing demand for Anchor’s services in the market.
Types of clients served by Anchor
Anchor caters to a wide range of clients, including fintechs, SaaS firms, e-commerce enterprises/marketplaces, and other tech-enabled businesses. Some of its notable clients include Bujeti, Pennee, SeamlessHR, LifeBank, Waza, and Zit.ng. By serving diverse industries, Anchor demonstrates its versatility and ability to meet the specific needs of different businesses.
Total transaction volume (TTV) and revenue generation
According to Anchor’s CEO, the fintech has generated over $550 million in annualized total transaction volume (TTV) by enabling fintech services for its clients. This significant TTV reflects the growing adoption of Anchor’s platform and the trust placed in its services. The revenue generated by Anchor comes from processing fees, issuance fees for accounts and cards, and interest income on the float.
Addressing Financial Inclusion
Anchor’s aim to encourage embedded financing for big supermarkets and multinationals
When Anchor initially launched, its objective was to encourage embedded financing for big supermarkets and multinational companies in Nigeria. The goal was to connect these enterprises online and power their financial service offerings. However, Anchor realized that many of these companies were not digitally ready yet, leading to a shift in strategy.
Focus on digitally ready and tech-enabled businesses
To adapt to the market’s demands, Anchor shifted its focus to digitally ready and tech-enabled businesses. These businesses were already equipped to leverage Anchor’s platform and make the most of its embedded finance services. This strategic shift allowed Anchor to target a segment that was more receptive and ready to adopt its solutions.
Challenges and lessons learned
Anchor’s first year in operation brought several challenges and valuable lessons. The company realized the importance of proper pricing, revenue diversification, and compliance processes. To address these challenges, Anchor plans to improve its compliance system, invest in value-added products like its ledger system, and onboard more customers. By learning from its experiences, Anchor aims to enhance its services and ensure sustainable growth.
Future Growth and Expansion
Plans to improve compliance system and invest in value-added products
To further enhance its operations, Anchor plans to improve its end-to-end compliance system. This improvement will ensure that Anchor meets all regulatory requirements and maintains a high level of security and trust for its customers. Additionally, Anchor intends to invest in value-added products, such as its ledger system, to offer enhanced features and functionalities.
Partnership with MTN’s fintech arm
Anchor has recently partnered with the fintech arm of MTN, Nigeria’s largest telecom company. This partnership opens up new growth opportunities for Anchor, as it can leverage MTN’s extensive network and customer base. Through this collaboration, Anchor aims to expand its reach and serve a larger customer segment.
Consideration of pan-African expansion
While currently focused on the Nigerian market, Anchor is exploring the possibility of expanding its operations to other African countries. With the African embedded finance market projected to be worth $384.8 billion by 2029, Anchor sees great potential for growth beyond Nigeria. Pan-African expansion would allow Anchor to tap into new markets and diversify its revenue streams.
The Embedded Finance Market
Projected value of the global embedded finance market
The global embedded finance market is expected to reach a value of $384.8 billion by 2029. This significant growth is driven by the increasing adoption of fintech solutions and the demand for embedded finance services. Companies like Anchor are well-positioned to capitalize on this market growth and provide innovative solutions to meet the evolving needs of businesses and consumers.
Anchor’s position in the African market
In the African market, Anchor holds a strategic position as one of the leading BaaS providers. With its comprehensive suite of product offerings and a growing client base, Anchor is poised to capture a significant share of the African embedded finance market. Their partnership with MTN further strengthens their position, offering access to a vast customer base and market opportunities.
Growth potential and opportunities for acquiring market share
The embedded finance market in Africa is still in its early stages but growing rapidly, with a compound annual growth rate (CAGR) of over 30%. Anchor’s impressive growth rate and its expanding product offerings position the company as a potential category leader in the African market. With its focus on personalized services, lower costs, and partnerships with established institutions, Anchor has a strong foundation to acquire market share and drive further growth.
Investor Perspective and Confidence in Anchor
Justin Kan’s bullish outlook on Anchor’s growth
Lead investor Justin Kan, partner at Goat Capital, is optimistic about Anchor’s potential for growth. He believes that Anchor’s growth rate is impressive and shows signs of becoming the category leader in embedded finance. Kan’s confidence in Anchor is reflected in Goat Capital’s investment in the company. The endorsement from an experienced investor like Kan further validates Anchor’s business model and growth prospects.
Goat Capital’s investment in Anchor as a category leader
Goat Capital’s investment in Anchor signifies their confidence in the company as a category leader in embedded finance. As an investor, Goat Capital seeks companies that show strong growth potential and the ability to become leaders in their respective markets. By investing in Anchor, Goat Capital recognizes the value and promise of the company’s product offerings and its potential for future success.
Future of Fintech and BaaS
Challenges in the fintech industry
The fintech industry faces several challenges, including regulatory compliance, cybersecurity, and customer trust. As the industry continues to grow and evolve, companies like Anchor must stay ahead of these challenges and demonstrate their commitment to security, compliance, and innovation. Overcoming these challenges will be crucial for the long-term success and sustainability of fintech companies.
BaaS as a potential solution
Banking-as-a-service (BaaS) emerges as a potential solution to address the challenges in the fintech industry. By providing APIs, dashboards, and tools, BaaS providers like Anchor empower developers and businesses to embed banking solutions seamlessly. BaaS offers a cost-effective and efficient way for businesses to offer financial services to their customers, driving innovation and financial inclusion.
As Anchor secures funding and expands its product offerings, it solidifies its position as one of the leading BaaS providers in Nigeria. With its focus on personalized services, lower costs, and strategic partnerships, Anchor is well-positioned to thrive in the highly competitive Nigerian fintech landscape. As the embedded finance market continues to grow, Anchor has the potential to emerge as a category leader not only in Nigeria but also in the wider African market.
