For years, many businesses have been dependent on traditional banks. However, the high costs and slow processes associated with them are now prompting some businesses to embrace fintech solutions. These innovative alternatives offer the promise of lower costs and faster settlements. There is a platform called Conduit that you may find interesting. After shifting its focus from cryptocurrency to traditional banking, the B2B cross-border payments platform has achieved remarkable success. Now, it is expanding its reach into Africa, a region that shares many of the same obstacles as the startup’s initial markets in Latin America. A $6 million seed extension from Helios Digital Ventures, the venture capital division of Helios Investment Partners, has made this expansion possible.
According to Conduit, businesses using its platform have the convenience of making direct payments to bank accounts using ACH or SWIFT, without the need for a U.S. entity. Last August, it started providing payments to businesses in Latin America.
Conduit’s original purpose was to serve as an API that connected fintechs, neobanks, and traditional financial institutions with crypto-backed earning products. The goal was to create a connection between traditional finance and decentralized finance (DeFi). With a solid foundation of $17 million in seed funding from esteemed investors such as Portage Ventures, Diagram Ventures, and Gradient Ventures, the fintech company created cutting-edge analytics tools tailored for institutional investors in the DeFi space. 
Transitioning from DeFi to TradFi
Nevertheless, following the decline of the crypto market in 2022, which saw the downfall of Terra, Luna, FTX, and other major players, Conduit recognized the need to adapt its business model. As a result, the company shifted its focus towards B2B cross-border payments. “After an extensive search for the perfect product-market fit, we finally discovered it in B2B cross-border payments,” shared co-founder and CEO Kirill Gertman during an interview with TechCrunch.
Recognizing the considerable obstacles that businesses in Latin American countries such as Colombia, Brazil, and Mexico encounter when attempting to connect to the global financial system, Conduit introduced its B2B cross-border payments platform for these regions in August 2023. Many of these businesses face challenges when it comes to accessing funds, establishing reliable SWIFT connections, and utilizing other crucial payment systems. Businesses in countries such as Kenya and Nigeria also face similar challenges in Africa.
We recognized this as a significantly more urgent and concrete issue than the phenomenon of decentralized finance. According to Gertman, these are the practical challenges that traditional businesses encounter when dealing with suppliers and partners across borders. He emphasized the importance of finding a more efficient, speedy, and transparent method for transactions.
In spite of the potential of DeFi and stablecoins such as USDC or USDT, the practical obstacles continue to be substantial. Many businesses continue to rely on converting stablecoins into local currencies for managing expenses such as rent, salaries, and operational costs.
Although Conduit still facilitates these conversions and enables businesses to convert stablecoins into local currencies, it is important to note that Gertman considers Conduit to be more aligned with traditional fintech now.
Facilitating financial transactions for companies in developing regions
In Latin America, Conduit’s origins lie alongside other companies such as Caliza and Mundi, which offer services like cross-border payments, currency exchange, and working capital solutions. According to Gertman, Caliza views local banks and their entrenched practices and limitations as the main competition, rather than other fintechs.
Consider Brazil and Nigeria as examples. These countries offer efficient instant payment systems, such as Pix and NIP for domestic transactions. However, when it comes to international transfers through local banks, there are some drawbacks. These transactions can be quite costly, with fees of up to $25 per transaction. Additionally, the processing time can take 2-3 days, and there may be additional fees and discrepancies in the amount received.
In order to streamline the money transfer process, Conduit has established partnerships with local banks in every country it operates in, including the U.S., Canada, Mexico, Colombia, Brazil, Kenya, and Nigeria. Moreover, it utilizes its technology to guarantee quicker payments. In this manner, the company’s customers have the convenience of sending money in their own currency through methods they are already familiar with. Conduit efficiently manages the transfer of funds and currency conversion, generating revenue through the difference in exchange rates, all while ensuring transparency for the recipient.
Conduit has a wide range of direct clients, including import and export businesses, payroll services, and other cross-border platforms. Recipients consist of businesses located in Conduit’s local markets and countries where it has established a network of partners, such as China and Hong Kong.
Expanding its market reach
According to Gertman, Conduit’s annualized transaction volume has experienced a significant surge from a few hundred million dollars to over $5 billion since the pivot. Last December, Conduit began expanding its reach to businesses in Kenya and Nigeria, which now account for 20% of its total revenue. The platform is also seeing a significant month-on-month revenue increase of 25% across both regions, which can be attributed in part to transaction fees.
According to the CEO, there is tremendous potential in Africa, with remarkable early growth and volumes that are expected to surpass Latin America by early next year. The CEO attributes Conduit’s success to the vast market opportunities in both regions.
On the other hand, the local currencies in Africa exhibit a higher degree of fragmentation, with intricate connections between them. It’s fascinating how these challenges take center stage, yet they also bring forth potentially greater opportunities.
By assembling a team under the direction of Eric Wainaina, a former director of The Kenyan Wall Street, an African financial data publication and distributor, the three-year-old fintech hopes to directly address these issues. The general manager will also spearhead the fintech’s upcoming expansion into other African markets, such as Ghana and South Africa, where established platforms like Aza Finance and YC-backed Verto and Waza are already operating.
In a broader sense, Mark Graves, who has experience working for the SEC in the U.S. and previously served as a CCO at Marqeta, a major card-issuing company, now holds the position of chief compliance officer at the firm. Meanwhile, Andre Masse, a fintech investor, is responsible for managing operations as the COO.
Gertman mentioned that Conduit’s roadmap will enable businesses in various regions, including Asia, to expedite cross-border B2B payments. In addition, Conduit aims to reach a point of breaking even and becoming profitable by the end of the year, according to his statement.
“In numerous emerging markets, local communities are rapidly adopting modern technology platforms to build real-time settlements. As a result, businesses in these markets now expect a similar level of efficiency and convenience for global payments, which are often lacking in traditional methods,” stated Wale Ayeni, managing partner at Helios Digital Ventures. It is our honor to assist Conduit in their mission to enhance African ecosystems’ connection with the global economy by revamping the back end for global payments.
