Two months into 2021 South African fintech Stitch emerged stealthily and raised $4,000,000 in seed funding. This allowed it to start inroads into Nigeria a few months earlier.
Today Stitch officially announced Nigeria's expansion and a $2 million seed extension. The total seed investment stands now at $6 million.
Existing backers Raba and Firstminute Capital, CRE. Village Global, 500 Fintech. Future Africa and Norrsken were among the investors in this round. The round also saw participation of new investors, mostly executives from global fintechs. These included Tom Blomfield (co-founder of Monzo and GoCardless); Matt Robinson (co-founder and president of GoCardless); Emilie Choi (president and COO at Coinbase); and Charlie Delingpole (founder and CEO of ComplyAdvantage).
Stitch introduced the Plaid playbook, which is used worldwide by fintech infrastructure players. It's a data product that helps developers and fintechs link their financial accounts to each other. With users' consent, these businesses can access their identities, accounts and transaction history.
Since Stitch was just launched stealthily, it felt premature for the company to reveal how many financial accounts it connected. Nine months later, Stitch is still not keen to share those numbers. However, it has been working on a payment product and has made substantial progress.
African fintechs rely on card payments most of the time. Despite the infrastructure provided by Yoco, Flutterwave, and Paystack there are still issues with chargeback fees, fraud costs, and other charges.
Stitch in South Africa decided to tackle these issues and help businesses process payment better by soft-launching its pay-by bank feature.
TechCrunch spoke with Kiaan Pillay who is the co-founder of Stitch and its CEO.
Pillay claims that the company has experienced more than 50% month-on–month growth in customer volume and payments volumes in South Africa within six months after soft launch.
Stitch also tested its Nigerian payments product rather than its primary data product. After speaking with over 40 fintechs, Stitch found a better use case for the payments product in Nigeria.
This is why Nigeria has an efficient and reliable instant bank settlement system. It also offers the ability to pay through various fintech apps. Customers who want to pay using their internet banking app or mobile phone must use their mobile bank app to complete the transaction.
The company stated that Stitch allows users to initiate bank transfers once-off, recurring, and user-not present.
Pillay, who cofounded Stitch along with Natalie Cuthbert, and Priyen Pillay, stated that the time is right. API fintechs are becoming more aware that customers who pay via credit card interchange will be charged a steep fee to convert them onto their platforms. We have seen inbound requests rise five to tenfold in South Africa this month, and customers integrate us in Nigeria, even though we were still in soft launch.
Stitch claims it is now fully operational in South Africa, Nigeria and will be able to make $10 million monthly payments by the end. Chipper Cash and Paystack are just a few of the clients.
It seemed like there was an African Plaid when open banking startups entered the African fintech scene. Each player is now settled in their markets: Pngme in Kenya, Nigeria, and Mono in Nigeria and Ghana, Okra in Nigeria, beta in South Africa, and Kenya, and Stitch, South Africa, and Nigeria.
This shows how crucial Nigeria is for startups. How does Stitch acquire customers in a market with other payment providers?
We are giving Nigerian businesses that plan to use Stitch access for free until 2021. This is a first step, Benjamin Dada, Stitch Nigeria's country manager, said to TechCrunch.
Dada will be the leader of Stitch's Nigeria operations. He was previously the editor-at-large and founder of Benjamindada.com, a Nigerian tech publication. Eyowo is a Nigerian digital bank. The country manager fintech experience came from working with partnerships for Eyowo and FairMoney, which was backed by Tiger Global.
Dada is confident that the market will be large enough to support multiple players. However, he said the team would like to make an impact by offering sustainable and inclusive pricing to its customers.
They will be able to save money by accepting payments from accounts. Additionally, they will now be able to earn a little more each time they accept payments via Stitch.
It is unclear at the moment how the company will do this. The company intends to launch its data solution before the end of November. This will include the seed extension and more hires joining Dada and his team at Lagos, Nigeria.
Blomfield stated in a statement that Stitch was his choice because he believes the company will play a key role in building infrastructure for Africa's digital finance companies to grow exponentially.
There is a lot of potential for Africa markets. The wave of digital finance innovation in Africa is really starting to gain momentum. Stitch is entering at the perfect time. I have seen the Stitch team as one of the most talented in the world, and I am excited to see their growth in Nigeria and elsewhere.