Silicon Valley Bank in March 2023 folded and this made Mercury, a San Francisco digital bank, the preferred banking partner for African startups.
Consequently, by August 22, 2024, thirteen African nations will have their user accounts closed by Mercury. Though many startups are anticipated to struggle to seek alternative banking solutions as a result of these developments, people from 37 countries will be affected by the new restrictions.
“Due to recent changes in how we determine account eligibility, we are no longer able to support accounts for businesses with associated addresses located in these countries” according to emails seen by TechCabal. Under the new prohibitions, any African startups registered in Delaware cannot be opened unless the founders reside within America.
Burundi, Cameroon, Central African Republic, DR Congo, Congo, Liberia, Mali, Mozambique, Nigeria, Somalia, South Sudan, Sudan and Zimbabwe are among the thirteen African countries affected by these restrictions.
Mercury’s exit has given rise to alternative options for African startups, such as Brex, Ramp, Wise and fintechs like Leatherback, Raenest and Graph.
In an interview with Channels TV, Ibrahim Ibitade who is the CEO & Co-Founder of Leatherback gave some advice to the affected start-ups: “What I would advise African startups to do is make sure our house is in order, get the necessary regulatory requirements and approval needed to make sure you conduct business.”
He also talked about his company’s solutions at Leatherback: “Leatherback is solving that problem generally today. We offer USD accounts across multiple jurisdictions to different businesses and African startups and technology startups that need to conduct business globally. Beyond USD accounts, we also offer Canadian dollars and Nigerian Naira accounts, which makes it easy for businesses to carry out their global treasury functions easily.”
For instance countries like Nigeria, about which he was asked and that have not given much priority to fintechs and startups in its economies, Ibitade said in less words that despite fraud challenges, fintechs are generally doing well. “The fraud situation has not made it very easy. You’ve seen the news about chargeback frauds and different situations, but amidst all that, you will find that a major driver of revenue and economic growth is fintech.”
Mercury’s departure marks a significant change for African startups, compelling them to adapt quickly since their operations and growth depend on finding new banking solutions.
