Cross-border payments for businesses in emerging markets remain significantly untapped, despite small to large businesses using banks and legacy fintechs to transact trillions of dollars in transaction volume annually.
A report by Airwallex forecasts 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 to $150 trillion, with business-to-business (B2B) payments making up 97% of that volume.
For years, most businesses have relied on traditional banks, but high costs and slow processes are pushing some to adopt fintech solutions that promise lower costs and fast settlements.One such platform is Conduit. The B2B cross-border payments platform found success after pivoting from crypto to traditional banking and is now making inroads in Africa, where businesses face many similar challenges to the startup’s first markets in Latin America, following a $6 million seed extension 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 legacy financial institutions with crypto-backed earning products, Conduit wanted to bridge traditional finance with decentralized finance (DeFi). The fintech, backed then by $17 million in seed funding from investors like Portage Ventures, Diagram Ventures and Gradient Ventures, developed analytics tools for institutional investors in DeFi.
From DeFi to TradFi
However, after the crypto market downturn of 2022 — marked by the collapse of Terra, Luna, FTX and others — Conduit realized its initial model was unsustainable, and pivoted to focus on B2B cross-border payments. “After over 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 businesses in countries like Colombia, Brazil and Mexico face when trying to connect to the global financial system. Many of these businesses struggle with access to dollars, reliable SWIFT connections and other essential payment rails. The situation is similar in Africa, where businesses in countries like Kenya and Nigeria also encounter these difficulties.
“We identified this as a much more pressing and tangible pain point than the bubble of decentralized finance. These are real-world issues faced by traditional businesses that need a better, faster and more transparent way to transact with their suppliers and partners across borders,” Gertman remarked.
Despite the promise of DeFi and stablecoins like USDC or USDT, the practical challenges remain significant. Most businesses still need to convert stablecoins into local currencies to manage rent, salaries and other operational costs.
While Conduit still helps bridge this gap by facilitating these conversions, allowing businesses to off-ramp stablecoins into local currencies where needed, Gertman quickly points out that Conduit is now much closer to a traditional fintech.
Moving money for businesses in the Global South
In Latin America, where Conduit started, companies like Caliza and Mundi also provide cross-border payments, currency exchange and working capital solutions. Yet, Gertman says Conduit doesn’t see other fintechs as the competition, but rather countries’ local banks and their systems’ entrenched practices and limitations.
Take Brazil and Nigeria as an example. These countries have efficient instant payment systems like Pix and NIP for domestic transactions; however, international transfers using the same local banks can cost up to $25 per transaction and take two-three days to process, often with additional fees and discrepancies in the amount received.
To provide a more efficient money transfer process, Conduit partners with the same local banks in each country it operates — the U.S., Canada, Mexico, Colombia, Brazil, Kenya and Nigeria. However, it leverages its tech to ensure faster payouts. This way, its clients can send money in their local currency using familiar methods. Conduit handles the money transfer and currency conversion — earning revenue on the spread — while assuring transparency for the recipient.
Conduit serves more than 50 direct clients; most are import and export businesses, payroll services and other cross-border platforms. Recipients include businesses in Conduit’s local markets and countries where it has a network of partners, such as China and Hong Kong.
Extending its market presence
Gertman states that since the pivot, Conduit’s annualized transaction volume has surged from a few hundred million dollars to over $5 billion. Of this, 20% comes from businesses in Kenya and Nigeria, where Conduit began its expansion last December. The platform is also experiencing a 25% month-on-month revenue increase across both regions, partly driven by transaction fees.
“We see even greater potential in Africa, with impressive early growth and volumes we think might surpass Latin America by early next year,” said the CEO, who owes Conduit’s numbers to the vast market opportunity across both markets.
“However, Africa’s local currencies are much more fragmented, and the connections between these currencies are often more complex. It’s interesting because even though these challenges are prominent, it also presents potentially even bigger opportunities.”
The three-year-old fintech will seek to address these challenges head-on by hiring a team managed by Eric Wainaina, the ex-director of The Kenyan Wall Street, an African financial data publication and distributor. The general manager will also lead the fintech’s imminent expansion into other African markets, including Ghana and South Africa, where established platforms like AZA Finance and YC-backed Verto and Waza already operate.
More broadly, Mark Graves, who worked for the SEC in the U.S. and was an ex-CCO at card-issuing giant Marqeta, heads compliance for Conduit. On the other hand, Andre Masse, an investor in the fintech, oversees operations at the fintech.
According to Gertman, Conduit’s roadmap will also allow businesses in other regions, including Asia, to make faster cross-border B2B payments while adding that Conduit plans to break even and achieve profitability before the end of the year.
“In many frontier markets, local settlements are increasingly real-time built on modern tech stacks, and businesses in these frontier markets are now demanding the same experience when it comes to global payments where they are currently often underserved by traditional methods,” said Helios Digital Ventures managing partner Wale Ayeni, in a statement. “This requires rebuilding the back end for global payments, and we are privileged to support Conduit in their journey to do just that, better servicing African ecosystems in connecting with the global economy.”
