Conduit Broadens International Reach: $6M Funding Fuels Expansion of Cross-Border Payments from Latin America to Africa

The domain of cross-border trade payments in emerging economies is largely untapped, though they represent a massive transaction volume managed mostly through conventional banking systems and old-school fintech annually.

According to a study by Airwallex, outlined in a research piece, cross-border payment volumes are on track to expand by 60%, reaching a staggering $250 trillion by 2027. The period from 2018 to 2022 saw a significant $25 trillion bump in these transactions, totaling $150 trillion, of which 97% was attributed to business-to-business (B2B) dealings.

Conventional banking institutions have long been the go-to for most companies, yet the high cost and sluggish operations have increasingly led some to switch to fintech solutions promising quicker settlements at reduced expenses. A promising example is Conduit, a B2B payment platform adept at cross-border transactions. Having initially explored crypto solutions, Conduit has now successfully pivoted towards traditional banking, embarking on significant strides within the African market—a region encountering similar hurdles to its early markets in Latin America. This move comes after securing a $6 million seed extension from Helios Digital Ventures, part of Helios Investment Partners.

Conduit facilitates businesses to make payments in US dollars directly into bank accounts through both ACH and SWIFT systems, without requiring a U.S.-based entity. The service was introduced to Latin American enterprises last August.

Originally introduced as an API linking fintechs, neobanks, and established financial bodies with crypto-backed earning opportunities, Conduit aimed to merge conventional finance with the decentralized finance (DeFi) domain. Supported by a hefty $17 million seed investment from entities like Portage Ventures, Diagram Ventures, and Gradient Ventures, the company developed comprehensive analytics for institutional investors interested in DeFi.

Shifting Gears: From DeFi to Traditional Finance

The cryptocurrency market’s downturn in 2022, highlighted by several notable collapses, led Conduit to reassess its operational model, shifting its focus towards B2B cross-border payments. “Our extensive search for a viable product-market fit concluded successfully with the discovery of immense opportunities in B2B cross-border transactions,” shared co-founder and CEO Kirill Gertman in a dialogue with TechCrunch.

In August 2023, Conduit unveiled its B2B payment service for Latin American companies, acknowledging the substantial barriers these companies face in linking with the global economic system. Issues like accessing the US dollar, securing dependable SWIFT connections, and other critical payment infrastructures are prevalent, much like in Africa, where nations like Kenya and Nigeria face analogous challenges.

Gertman observed, “The difficulties and needs of traditional businesses connecting globally are far more compelling and immediate compared to the speculative nature of decentralized finance. It’s about offering a superior, more efficient, and transparent solution for international transactions.”

Despite the advancements in DeFi and the use of stablecoins like USDC or USDT, converting these into local currencies for everyday operational costs remains a significant challenge for many businesses.

Conduit has evolved to closely resemble a traditional fintech service, maintaining its role in facilitating stablecoin conversions into local currencies for businesses, thereby bridging a critical gap, as pointed out by Gertman.

Supporting Financial Operations for Businesses in the Global South

In the regions it serves, including Latin America, Conduit faces competition not from other fintech firms but from entrenched banking systems within each country. Issues faced in Brazil and Nigeria exemplify how, despite efficient domestic payment infrastructures like Pix and NIP, international transactions can be costly, slow, and often laden with hidden fees.

Conduit partners with local banks in operational countries, leveraging its technology to ensure quicker payment processes. By doing so, it allows clients to transact in their local currency using familiar mechanisms while it handles currency exchange and transfers, ensuring transparency for the recipients and deriving revenue from the transaction spreads.

Currently, Conduit caters to over 50 direct clients, serving a variety of sectors including import/export businesses and payroll services, extending its network to countries like China and Hong Kong.

Broadening Market Reach

Since pivoting, Conduit has experienced a significant spike in its transaction volume, now exceeding $5 billion annually, with 20% of this growth attributed to its ventures in Kenya and Nigeria since last December. The company is witnessing a 25% monthly revenue growth in these regions, fueled by transaction fees.

“Africa presents an even more substantial potential, with promising early growth indicating a possible overtaking of Latin American volumes by next year,” Gertman mentioned, signaling the vast opportunities spanned across these markets.

Conduit anticipates addressing the intricate challenges posed by Africa’s fragmented currencies and complex intercurrency connections by recruiting a dedicated team led by Eric Wainaina, formerly of The Kenyan Wall Street. This team will spearhead the fintech’s aggressive expansion into additional African territories such as Ghana and South Africa, areas already populated by established platforms like Aza Finance and Verto.

In broader strategic moves, Mark Graves, former SEC employee and Marqeta’s ex-CCO, serves as the chief compliance officer, while investor Andre Masse takes the helm of operations as the COO.

Further, Conduit is gearing up to enable businesses in Asia and other regions to benefit from quicker cross-border B2B payments, with Gertman expressing aspirations for profitability within the year.

Helios Digital Ventures managing partner Wale Ayeni emphasized, “In many emerging markets, domestic settlements are increasingly executed in real-time, creating a demand for similar expediency in global payments. This innovation in the payment backend is crucial, and we’re excited to back Conduit in enhancing connectivity between African economies and the global market.”