Rising economies are grappling with trade deficits leading to an increased demand for the US dollar, which holds a dominant position in international trade. This situation results in higher costs and prolonged trading periods. The challenge is particularly stark in Africa, where there is a notable lack of technological solutions tailored to satisfy the liquidity needs of sizable corporations and multinational companies. Instead, the focus of most cross-border payment services has been on developing products geared towards consumers.
Stepping into this arena is Waza, a platform supported by Y Combinator that has recently emerged with $8 million in seed funding. This nascent enterprise boasts of simplifying the process for African firms and merchants in settling payments and managing suppliers on an international scale. The platform is eyeing a $7 trillion market, with aspirations of generating $250 billion in turnover.
As per an early report by TechCrunch this year, the sector of cross-border financial technology and payments is witness to a significant boom, particularly among startups backed by Y Combinator in recent cycles. With forecasts suggesting the market could reach or exceed $250 billion by 2027, fintech firms are increasingly positioning themselves as formidable competitors against traditional banking institutions, especially in the B2B domain.
Initiating its journey in January 2023 after participating in the winter batch of Y Combinator, Waza is poised to leverage this upward trend and make significant inroads within the international payment realm, beginning with the African continent.
By the close of its inaugural month, Waza declared a total payment volume of $280,000, as shared by co-founder and CEO Maxwell Obi with TechCrunch. By May, the fintech giant processed payments amounting to $70 million monthly, translating into an annualized transaction volume of $700 million. Obi further noted that Waza is witnessing a monthly growth rate of 20% in terms of transaction volumes and revenue, which are bolstered by FX spread and a transaction fee ranging from 0.75% to 1%.
Waza has been instrumental in streamlining payment operations and liquidity management for numerous clients across six continents, serving three distinct categories with varying requirements.
These categories include multinational entities like airlines based in the US but operating in Africa facing liquidity hurdles; importers and merchants engaging with suppliers from countries such as India, China, and the UK; and other fintech firms and developers seeking API infrastructure to craft their own cross-border payment solutions. Competitors in this domain include names like AZA Finance, Verto, and Conduit, the latter having recently expanded its services into Africa from Latin America.
Obi emphasized Waza’s commitment to affordability and swift settlement times as their core value proposition in the trade payment landscape. He attributes the company’s unique edge in the market to its extensive global banking partnerships, allowing it greater control over its payment infrastructure. This, according to Obi, positions Waza as a more economical choice compared to its rivals and has been pivotal in securing a loyal customer base thus far.
Prior to launching Waza, Obi held various pivotal roles in the fintech arena. He co-founded Amplify, a Nigerian fintech enterprise that was later acquired by Carbon, and subsequently joined Sendwave, a subsidiary of Zepz, where he played an instrumental role both before and after its $500 million acquisition by Zepz.
During his tenure at Sendwave, he realized the acute need for a mechanism to facilitate payments to global suppliers and vendors, a need that peer-to-peer remittance services like Sendwave were not designed to meet. This sparked the initial conception of Waza.
Obi partnered with CTO Emmanuel Igbodudu, a former senior engineer at Revolut, to establish Waza. Igbodudu, with his significant experience in the fintech space, including roles at Carbon and other prominent Nigerian fintech firms, brought a wealth of technical expertise to the venture.
The founders are keen on cementing Waza’s position in trade finance and cross-border payments before broadening their focus. Their initial emphasis is on ensuring money transfers are executed seamlessly and economically. However, plans are afoot to explore products that facilitate B2B payments and other verticals in the near future.
Obi hinted at the potential development of a banking solution akin to Brex or Mercury but tailored for the African market, possibly integrating credit, financing options, or a stablecoin banking product catered to the digital economy.
The seed funding is earmarked for broadening the scope of Waza’s services into new territories beyond its existing markets in Ghana and Nigeria. The investment round features contributions from Y Combinator, Byld Ventures, Norrsken Africa, Heirloom VC, Plug and Play Tech Center, and Olive Tree Capital, aggregating $3 million in equity. Timon Capital, based in Lagos and New York, channeled an additional $5 million in venture debt financing into Waza to initiate trade finance solutions for its large corporate clientele.
Chris Muscarella, the managing director of Timon Capital, lauded the Waza team for their profound understanding of cross-border flows and their strategic venture into one of the most lucrative sectors in emerging markets.
Compiled by Techarena.au.
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