Partnering with financial institutions enhances access to FX – Blaaiz boss

Founder and Chief Executive Officer of Blaaiz, an early-stage cross-border payments firm, Ifelade Ayodele tells FELIX OLOYEDE the impact of the closure of Nigerian accounts by Mercury on local startups

How has the closure of Nigerian accounts by Mercury impacted startups and the broader tech ecosystem in Nigeria?

The abrupt closure of Nigerian accounts by Mercury has undoubtedly caused a significant degree of consternation, particularly due to the short notice provided. Founders, especially those not residing in the United States, have been compelled to rapidly seek alternative banking solutions. While from Mercury Bank’s perspective, the aggregate deposits from Nigerian accounts might constitute merely one per cent of its total deposit base, these funds are indeed the lifeblood of the burgeoning African tech ecosystem. This ecosystem harbours the potential to birth the next wave of unicorns and mid-sized corporations that will drive economic growth in Nigeria and the wider continent.

Currently, the full extent of the impact remains to be seen. There have been opportunistic moves by other financial players to capture this market and provide safe havens for these displaced deposits. Founders must conduct thorough due diligence on the alternatives available to them, ensuring they partner with credible firms. This due diligence, while potentially distracting, is crucial for safeguarding the future financial stability and growth of their ventures.

In response to Mercury account closures, how is Blaaiz positioning itself to support affected Nigerian businesses?

Interestingly, our Blaaiz Business offering was launched just a few weeks prior to this announcement and has already seen encouraging traction. We are well-positioned to support Nigerian businesses and founders by providing the essential account infrastructure needed to manage their financial obligations. This includes the ability to receive investment funds and receivables from trade partners, thereby, ensuring that their economic activities resonate across continents, irrespective of the geographical distances involved.

What are the key benefits of having financial solutions developed by local Nigerian founders who are familiar with the market’s specific needs?

The primary benefit of financial solutions developed by local Nigerian founders lies in the accurate and objective assessment of risks, as opposed to an unfounded and exaggerated perception of risk. Local founders possess a nuanced understanding of market dynamics and the specific challenges faced by businesses within the region. This insight enables them to implement appropriate, fit-for-purpose risk treatments, either at the inception of the business relationship or on an ongoing basis. Consequently, these solutions incorporate a well-informed perception of risk into their controls and measures without stifling the commercial drive or aspirations of the businesses they serve. This alignment of risk management with commercial objectives is largely achievable when the solutions are crafted by those intimately familiar with the local market.

What are the primary obstacles Nigerian businesses encounter with cross-border payments and what strategies can be adopted to address these issues effectively?

The principal challenges faced by Nigerian businesses in the realm of cross-border payments include speed, compliance, digitisation of processes, transaction costs, and access to foreign exchange.

To address these issues effectively, the following strategies can be adopted:

Leveraging credible fintechs: Utilizing fintech solutions that offer digitised channels can optimise transaction speed and reduce costs. These fintechs often have streamlined processes that facilitate quicker and more efficient transactions.

Investment in compliance: Businesses must invest in compliance measures relevant to their operations. This not only eases collaboration with fintech partners but also enhances the overall perception of the Nigerian financial ecosystem.

Enhanced access to foreign exchange: Developing partnerships with multiple financial institutions can improve access to foreign exchange. Additionally, participating in government forex allocation programmes can be beneficial.

In what ways can local fintech firms like Blaaiz enhance the resilience of the financial ecosystem for startups in Nigeria?

Local fintech firms can significantly bolster the resilience of the financial ecosystem for startups in Nigeria through several strategic initiatives. At Blaaiz, we focus on three core areas with the potential for multiplier effects:

Seamless cross-border payment infrastructure: providing reliable and efficient cross-border payment solutions that facilitate smooth international transactions.

Regulatory compliance solutions: offering automated compliance solutions to help startups navigate the complex regulatory landscape with ease.

Facilitating ecosystem collaboration: encouraging collaboration among players in different or similar sectors to foster a supportive and innovative startup community.

By addressing these areas, Blaaiz aims to create a robust and resilient financial environment conducive to the growth and success of Nigerian startups.

How do you view the impact of regulatory environments on banking relationships for Nigerian startups?

The regulatory environment plays a crucial role in shaping banking relationships for Nigerian startups. The primary objective of regulatory frameworks is to ensure stability within the financial system and protect end users, including both consumers and businesses. Given this mandate, any setbacks or challenges in the relationships between banks and startups are, to a considerable extent, understandable and navigable. Banks are obligated to comply with stringent regulations, which can sometimes create friction in their interactions with startups. However, these regulations are essential for maintaining the integrity and stability of the financial system.

What changes would improve the current situation?

To improve the current situation, greater participation and involvement of startups, particularly fintech startups, in the development of regulatory guidelines and policies is essential. This inclusive approach can ensure that the policies governing the relationships between banks and fintech startups are well-informed and conducive to innovation. Fintech startups extend the influence of banks and regulators, playing a pivotal role in enhancing financial inclusion and driving economic growth. By actively involving these startups in policy development, regulators can create a more favourable environment that supports innovation while maintaining financial stability.

What emerging trends or innovations in cross-border payments could offer advantages to startups in Nigeria and Africa?

Several emerging trends and innovations in cross-border payments hold significant promise for startups in Nigeria and Africa:

Real-time payment systems: The adoption of real-time payment systems, such as the Single Euro Payments Area in Europe, can facilitate instant settlement of cross-border transactions, improving cash flow and reducing transaction times for startups.

Open banking: Open banking initiatives enable the sharing of financial data through APIs, allowing fintech companies to develop innovative payment solutions. This can lead to enhanced service offerings for startups.

Artificial intelligence and machine learning: These technologies are increasingly being used for fraud detection and predictive analytics, providing startups with tools to enhance security and make informed financial decisions.

By leveraging these trends, Nigerian and African startups can overcome traditional barriers to cross-border payments, enhancing their operational efficiency and expanding their market reach.

What motivated Blaaiz’s transition from serving individual clients to focusing on business clients?

It is important to clarify that Blaaiz did not transition from serving individual clients to focusing solely on business clients. Our strategy has always encompassed both segments. We commenced operations by serving individuals to gain a thorough understanding of the market, allowing us to optimise our services for this segment. As planned, we subsequently introduced services for business clients. Our individual clientele base has grown significantly across our operating countries, and we remain committed to serving them while also expanding our offerings to support businesses.

In the context of the startup ecosystem, at what stage should a startup consider itself to have broken even?

In the context of the startup ecosystem, a startup can be considered to have broken even when its total revenues equal or are greater than its total costs, meaning it can sustain itself without relying on external funding for operational expenses.

With a decline in equity funding within Nigeria’s startup scene, what are the alternative funding opportunities available to Nigerian startups?

In light of the decline in equity funding within Nigeria’s startup scene, several alternative funding opportunities can be explored:

Debt financing: With a sound business model, startups can explore debt financing options, including bank loans and venture debt, which can provide the necessary capital for growth without diluting ownership.

Grants and competitions: Participating in local and international grant programmes and startup competitions can provide non-dilutive funding and valuable exposure.

Crowdfunding: Utilising crowdfunding platforms to raise funds from a broad base of individual investors can be an effective way to secure capital.

Aside from the $1.5m pre-seed funding, what additional financial support has Blaaiz received?

Aside from our pre-seed funding, Blaaiz has not received any other additional financing. We have focused on effectively utilising the initial funding to scale our operations and achieve our strategic objectives.

What strategies can Nigeria adopt to become a leading startup hub, similar to India or China?

To position Nigeria as a leading startup hub, several strategic initiatives can be adopted, some of which include:

Improving infrastructure: Investing in both digital and physical infrastructure is crucial. This includes enhancing internet connectivity, power supply, and transportation networks.

Ease of doing business: Simplifying business registration processes, and ensuring a stable regulatory environment can attract more startups and investors.

Entrepreneurship education and skills development: Integrating entrepreneurship education into school curricula and providing specialised training programs can foster a culture of innovation and entrepreneurship.

Focus on key sectors: Identifying and prioritising key sectors with high growth potential, such as fintech, agritech, healthtech, and edtech, can concentrate resources and support for these industries.

By adopting these strategies, Nigeria can create a vibrant and dynamic startup, positioning itself alongside the likes of India.