Nigerian fintech startup, Lemonade Finance, has raised $725K in pre-seed funding for a project aimed at improving access to financial services for African diaspora investors.
Nigerian fintech startup Lemonade Finance has secured a US$725,000 pre-seed funding round. The round was led by Y Combinator and other investors Ventures Platform, Acuity Venture Partners and Microtraction. The platform allows Africans to send and receive money from their countries in quick ways.
Lemonade Finance, established by Ridwan Olalere and Rian Cochran, was accepted into Y Combinator’s W21 cohort earlier this year. The platform enables Africans to send and receive money quickly from their own countries.
One of its investors, Dayo Koleowo, Managing Partner at Microtraction, says “Lemonade’s solution is very timely. As a multi-currency financial service provider, they make it easy for the African diaspora to send and receive money from their new country of residence, which is remarkable. We believe Rian and Ridwan have the technical and financial know-how to provide the number one cross-border neobank for Africans in the diaspora.”
Another Remittance Solution Platform
When Africans want to send or receive money to or from their family, dependent, children studying overseas, or businesses domiciled in Africa, they have few options and encounter problems.
Before Lemonade, Western Union, PayPal, and MoneyGram are some products Africans already used to process payments. But these options are typically expensive, take weeks to process payments, and restrict customers from certain locations from using their services. For example, PayPal allows Africans living in Africa to receive but not send money.
With Lemonade, users do not have to go to the bank, and within minutes, they can send and receive payment.
Africans need access to more than one currency
To allow Africans to use their money seamlessly, Lemonade Finance has provided them with access to currencies that matter to them, notably the currency of the country they are in and that of their home country.
This is a big deal for Africans in the diaspora who have businesses in Africa but want to move their money in foreign currencies. Currently, if an African wants to change their foreign currency to that of the home currency in order to, for example, pay for their parents’ healthcare, they have to deal with unfavourable rates and the length of time it takes for the exchange to take place.
Olalere and Cochran say that the flexible solution Lemonade provides is intentional and at the core of the team’s thinking in building the app.
“Before now, when Africans living in Africa moved to the diaspora, they could only create a bank account with the currency of their new country or the US dollar. While some can use their phone numbers to operate an African bank account, like with Guaranty Trust Bank (GTB), others have to travel back home to renew their token,” said Olalere.
Lemonade Finance wants to ensure that a Nigerian who resides in the UK, for instance, can open a Nigerian account and save money in Naira as well as pounds without leaving the UK.
Lemonade Finance faces regulatory and compliance problems. The startup has to go the extra mile to prove they are worthy of licenses in European and North American countries. This is because global banks have put African countries on a restricted list, preventing individuals and payments companies from sending money to Africa.
But Lemonade Finance is dedicated to letting global banks know that lowering financial barriers into Africa is a beneficial and strategic move. They have been able to get some of their partner banks to green-light Nigeria, Kenya, Cameroon and some other West African countries. Yet, even as these global banks have enabled this financial access, they charge customers making transactions to African countries a higher fee. They also place restrictions on the number of days or hours it takes for the money to reach Africa.
“On a daily basis, what we are constantly doing is fighting for everyday Africans to be globally included financially,” Olalere said.
Olalere revealed that the company’s biggest milestone happened earlier this year when they acquired a license in the UK, approved by the FCA, without stepping foot in the UK.
This is why this funding round, according to Olalere, is important. It will help them upgrade and get new licences, like the VMI license that allows them to hold wallets. This funding round will also help them hire for roles in the regulatory and compliance department, which will ultimately increase their customer base and allow them to reduce fees for customers.
Currently, Lemonade Finance is live in Canada, where it has gained thousands of customers already. In a few weeks, it will allow users in the UK to send and receive money from Ghana and Kenya; and in December, users in the US will be able to send and receive money from over 10 African countries at once.