As businesses use APIs to access customers’ financial accounts and provide a variety of integrated and embedded financial services, open finance remains a major theme in the fintech world. Stitch, one of the leading companies developing and operating these APIs in Africa, recently confirmed to TechCrunch that it has raised $21 million in Series A funding.
This news comes after Stitch raised $4 million in a stealth round in February 2021, which was a prequel to the $2 million extension round it received four months ago, bringing its seed round to $6 million. Stitch has raised a total of $27 million to date.
The API fintech in South Africa allows businesses to create, optimize, and scale financial products. With the new funding, the company plans to create a “financial graph” ecosystem across Africa, according to a statement released by the company.
The financial graph, according to the company, is an infrastructure for financial building blocks that enables businesses to write code once, launch in multiple markets, and scale more quickly thanks to interoperability across regions, providers, banks, and other types of financial accounts.
In an interview with TechCrunch, Stitch CEO Kiaan Pillay said, “We sort of view the broader financial ecosystem as a bunch of different nodes–bank accounts, merchants such as fintechs, or end-users–that are all intrinsically connected.” “We frequently consider the fact that these links between geographies and institutions do not yet exist. And a lot of what we try to do is bridge those gaps and make those connections commonplace.”
This graph is viewed by Stitch in three stages. The first is the pure infrastructure play of connecting financial and bank accounts with an API, which it launched from stealth. The second aims to attract merchants and businesses so that use cases and applications can be built on top of the infrastructure. The final step is to get end users to link their accounts with these businesses.
“On a high level, people switching for the first time from cash to digital causes more fragmentation. “We believe that putting everything into one network or graph helps to open up the space and break down the silos,” Pillay said. “And the way we think about it in the end is that people can easily move money between different applications and across different geographies and institutions.”Stitch’s specializes in e-commerce, marketplaces, and platforms, as well as fintechs, which are its most important clients. As in previous years, African fintechs outperformed other startups in terms of raising venture capital, particularly in 2021, when they raised 50-60% of total VC funding, according to reports. Infrastructure players like Stitch, Mono, Okra, Plaid, and OnePipe — all of which raised money within the last year, some in seed and others in Series A — are critical to the continent’s collective growth of driving financial inclusion and ease of payments.These companies use Stitch for KYC and onboarding, personal and business financial management, lending, wallet top-ups, and e-commerce checkouts, among other things. Businesses can access customer transaction histories and balance data, verify account information, and perform fraud checks using the platform’s data and identity products. One-click pay-ins and payouts are possible with the payments product, which allows for bank-to-bank transfers.
Wallet-based companies like Chipper Cash and Luno, embedded finance providers like ImaliPay, subscription platforms like FlexClub, and payment aggregators like Yoco are among the company’s customers.Stitch launched its payments product in South Africa in April 2021, and the following six months saw a 50 percent increase in payments volume month over month. Stitch launched its payment service in Nigeria in October, with plans to process $10 million in monthly payments by the end of the year.
Pillay, who co-founded Stitch with Natalie Cuthbert and Priyen Pillay, didn’t provide an update on this metric during the call, but did say that since launching the product last April, Stitch had seen a 104 percent month-over-month growth in payments value. In Q4 2021, the platform saw a 44 percent month-over-month increase in customers and a 72 percent increase in linked financial accounts.”As we continue to deepen the payments product and look at monthly and recurring payments, which are interesting feature sets for us,” Pillay said, “we’re proud of the partners and customers we have here.”
“A few of our customers recently went live in Nigeria, which has been very exciting for us.” We only accept payments there, but we’re eager to expand our offerings. This year, we’ll look into adding data and identity, as well as deepening the payment system in the same way that we do in South Africa.”The Spruce House Partnership, a long-term investment firm based in New York, led this round of funding. PayPal Ventures, TrueLayer, firstminute capital, The Raba Partnership, CRE Venture Capital, Village Global, as well as fintech founders and companies like TrueLayer, founders of Chipper Cash, Quovo, and Unit, and Guillaume Pousaz’s Zinal Growth, all participated in the round.
“We’ve been following African startups for a long time. “Our due diligence revealed that this is one of the most talented teams on the continent, and we are excited to be a part of what they are creating at Stitch,” Ben Stein, co-founder of The Spruce House Partnership, said.Pillay believes that raising funds from VC firms and operators who have successfully scaled fintech products across multiple geographies gives the company “something pretty special” as it enters its next phase of growth. The funds will enable Stitch to expand its team across offices in Cape Town, Johannesburg, and Lagos, as well as launch new product offerings and enter new markets across Africa, according to the company.