Anika Begay
Cross-border payments for businesses in emerging markets remain largely untapped, despite businesses large and small using traditional banks and fintechs to handle trillions of dollars in annual transaction volume.
A report by Airwallex predicts that the value of cross-border payments will grow by 60%, reaching $250 trillion by 2027. Between 2018 and 2022, the value of such payments increased by $25 trillion, reaching $150 trillion, with business-to-business (B2B) payments accounting for 97% of that volume.
For years, most companies have relied on traditional banks, but high costs and slow processes are pushing some to adopt fintech solutions that promise lower costs and quick settlements. One such platform is Conduit. The B2B cross-border payments platform has found success after pivoting from cryptocurrencies to traditional banks and is now making inroads in Africa, where companies face many of the same challenges as the startup’s early markets in Latin America, following a $6 million seed round from Helios Digital Ventures, the venture capital arm of Helios Investment Partners.
Conduit says businesses on its platform can pay U.S. dollars directly to bank accounts via ACH or SWIFT, even without a U.S. entity. It began offering payments to businesses in Latin America last August.
Initially launched as an API to connect fintechs, neobanks, and traditional financial institutions with crypto-backed revenue products, Conduit sought to bridge the gap between traditional finance and decentralized finance (DeFi). The fintech, backed at the time by $17 million in seed funding from investors including Portage Ventures, Diagram Ventures, and Gradient Ventures, developed analytics tools for institutional investors in DeFi.
From DeFi to TradFi
However, after the crypto market crash of 2022, marked by the collapse of Terra, Luna, FTX and others, Conduit realized that its initial model was unsustainable and changed course to focus on B2B cross-border payments. “After more than a year of searching for the right product-market fit, we found it in B2B cross-border payments,” co-founder and CEO Kirill Gertman told TechCrunch in an interview.
In August 2023, Conduit launched its B2B cross-border payments platform for businesses in Latin America, recognizing the significant challenges that companies in countries like Colombia, Brazil, and Mexico face when trying to connect to the global financial system. Many of these companies struggle to access dollars, reliable SWIFT connections, and other essential payment channels. The situation is similar in Africa, where companies in countries like Kenya and Nigeria also face these challenges.
“We’ve identified this as a much more pressing and tangible pain point in the decentralized finance bubble. These are real problems faced by traditional companies that need a better, faster, more transparent way to transact with their suppliers and partners across borders,” Gertman noted.
Despite the promise of DeFi and stablecoins like USDC or USDT, there are still significant practical challenges. Most businesses still need to convert stablecoins into local currencies to cover rent, salaries, and other operating costs.
While Conduit is still helping to bridge this gap by facilitating these conversions, allowing companies to convert stablecoins into local currencies when needed, Gertman is quick to point out that Conduit is now much closer to a traditional fintech.
Moving Money for Companies in the Global South
In Latin America, where Conduit got its start, companies like Caliza and Mundi also provide cross-border payments, currency exchange, and working capital solutions. But Gertman says Caliza doesn’t see other fintechs as competitors, but rather local banks in countries and the entrenched practices and limitations of their systems.
Let’s take Brazil and Nigeria as an example. These countries have efficient instant payment systems such as Pix and NIP for domestic transactions; however, international transfers using the same local banks can cost up to $25 per transaction and take 2-3 days to process, often with additional fees and discrepancies in the amount received.
To provide a more efficient money transfer process, Conduit works with the same local banks in each country it operates in: the United States, Canada, Mexico, Colombia, Brazil, Kenya, and Nigeria. However, it leverages its technology to ensure faster payments. This way, its customers can send money in their local currency using familiar methods. Conduit handles the money transfer and currency conversion, earning revenue on the spread, while ensuring transparency for the recipient.
Conduit serves over 50 direct clients, spanning import and export, payroll processing and other cross-border platforms. Target audiences include businesses in Conduit’s local markets and in countries where it has a partner network, such as China and Hong Kong.
Expand your market presence
Gertman says that since the pivot, Conduit’s annualized transaction volume has increased from a few hundred million dollars to more than $5 billion. Of that, 20% came from companies in Kenya and Nigeria, where Conduit began its expansion last December. The platform is also seeing a 25% month-over-month increase in revenue in both regions, driven in part by transaction fees.
“We see even greater potential in Africa, with impressive early growth and volumes that we think could surpass Latin America early next year,” said the CEO, who credits Conduit’s numbers to the vast market opportunities in both markets.
“However, Africa’s local currencies are much more fragmented and the connections between these currencies are often more complex. This is interesting because, while these challenges are obvious, they also present potentially even greater opportunities.”
The three-year-old fintech will seek to address these challenges head-on by hiring a team led by Eric Wainaina, former editor of The Kenyan Wall Street, a publication and distributor of African financial data. The CEO will also lead the fintech’s upcoming expansion into other African markets, including Ghana and South Africa, where established platforms such as Aza Finance and YC-backed Verto and Waza already operate.
More generally, Mark Graves, who worked for the SEC in the United States and was a former CCO at card-issuing giant Marqeta, is the company’s chief compliance officer. On the other hand, Andre Masse, a fintech investor, oversees operations as COO.
Conduit’s roadmap will also enable companies in other regions, including Asia, to make faster cross-border B2B payments, according to Gertman. He also said Conduit expects to break even and be profitable before the end of the year.
“In many frontier markets, local settlements are increasingly powered by modern technology stacks in real time, and companies in these frontier markets now require the same expertise when it comes to global payments, where they are currently often underserved by traditional methods,” Wale Ayeni, managing partner at Helios Digital Ventures, said in a statement. “This requires rebuilding the backend for global payments, and we are privileged to support Conduit on their journey to do just that, better serving African ecosystems as they connect to the global economy.”
