Announcing our Investment in Lemonade Finance 🎉🎉
Lemonade Finance is a cross-border payments platform
Team
- Ridwan Olalere, CEO and Co-founder: Ridwan is the co-founder and Chief Executive Officer (CEO) of Lemonade Finance. He formerly worked as Director of Payments at OPay and as Senior Director of Operations at ORide. Ridwan has technical backgrounds from building software applications at Hotels.ng and Flutterwave.
- Rian Cochran, CFO and Co-founder: Rian is the co-founder and Chief Financial Officer (CFO) at Lemonade Finance. He has worked as Director of Finance at Opera Software, a NASDAQ-listed company. Prior to leaving Opera, he spearheaded the setup and management of Opera’s fintech initiatives in Africa and South-East Asia.
Problem
Cross-border payments for Africans are plagued by 3 major issues — long transaction completion times, restrictions in terms of use, and steep fees. These issues mean that platforms for international transactions, especially peer-to-peer are either unavailable to Africans or limited in their functionality.
For instance, WorldRemit and TransferWise allow Nigerians receive from other countries but prevent them from sending. PayPal does the opposite, allowing Nigerian users to send but blocking them from receiving money.
When the international funds transfer option is available, wait time to transaction completion could be up to 2–4 days, like with Western Union. In addition to this delay, Africans often have to pay higher than the global average. The average cross-border transaction in Africa reduces the value by 9% in comparison to the global average of 6.5%.
Legacy banking institutions in Nigeria do not allow end-to-end or interbank foreign currency (FCY) transactions via their mobile banking applications. Payment routes when the transactions are initiated in person are complex, often involving multiple banks. These inefficiencies in addition to the limited ability to create and manage accounts domiciled in one’s country of origin point to the need for a new way to conduct diasporan banking.
Solution
Lemonade Finance is a multi-currency platform and financial services provider developing services for the African diaspora. Lemonade offers the ability to manage bank accounts in multiple currencies and move money across borders at cheap rates.
The company offers local and international transfers to Ghana, Kenya, Nigeria, Canada, and the UK instantly without hidden fees and makes international transfers at the real market exchange rate. With Lemonade Finance, users can send money across Africa quickly and conveniently to local bank accounts and mobile money accounts.
“Before Lemonade, international money transfers that should take minutes took days. Those are hours of stress and anxiety for you and your family while your money is stuck in transit. The Lemonade app solves all that, with great rates and instant transfers across borders; it’s a game changer for the African diaspora.” — Ridwan Olalere, CEO
How it works
The Lemonade Finance application can be accessed via the Google Play Store and iOS App Store. Once downloaded, getting onboard is a 4-step process in which your mobile number, identity, and authentication details are registered.
Once standard regulatory documents are provided — Bank Verification Number (BVN), a live image of the account holder and an image of a government-issued identification document — customers are immediately able to fund their Lemonade Naira wallet, purchase airtime at 2% off and make cross-border payments to supported countries and regions.
Once regulatory requirements are met, customers can fund their wallet, purchase airtime, and make cross-border payments
Market
Nearly 100,000 Nigerian students were enrolled abroad last year. These students are often held hostage to fluctuating policies which make it difficult to receive school fees, medical aid funds, and pocket money in a timely manner. This has created a gap in the market that Lemonade Finance wants to fill.
In the larger remittance space, the global inflow to Africa (2018–2019) was worth over $85B and the outflow over $10B, according to the World Bank. While the global bank predicted a 23.1% decline in remittance flows in Sub-Saharan Africa (second to Europe and Central Asia’s 27.5%) due to the economic downturn caused by COVID-19, remittance companies have seen a month-on-month uptick in the time since.
Alternate Investment traders who operate P2P platforms and need to send money from Nigeria to a seller in Ghana or Kenya can also take advantage of Lemonade’s solution.
The Team
Ridwan and Rian cut their teeth in payments while at Opera. Learning the ins and outs of how a financial services company worked, Ridwan’s technical background became even more rounded while Rian’s specialty in finance further became sharpened.
This team has depth of expertise and experience, team cohesiveness, a vast network, and a deep-seated payments problem to solve on its side. As with our current portfolio companies, we believe in the team’s ability to execute. So far, Ridwan and Rian have demonstrated the ability to execute many tasks with speed and almost simultaneously.
Traction
Lemonade Finance opened its doors to beta users in 2020, kicking off with Canada to Nigeria transfers. As at the time of our investment, Lemonade Finance had processed ~$30,000 from around 100 users. Lemonade Finance has since crossed the $1M mark while simultaneously making tangible progress regulatory-wise.
Conclusion
Apart from opening up new transfer rails and bills payments, the company plans to launch its Cards feature in the coming months. With this feature, users will be able to create virtual Naira (NGN) and Dollar (USD) cards to complete transactions on local and international websites. While they are not the first company to power this, Lemonade Finance brings the added advantage of creating an unlimited number of cards and allowing its users earn rewards with its cashback program.
Customers will be able to use their cards to pay for global services like Apple Music and its related services, Netflix, Spotify, Amazon, PayPal, and GooglePay.
As cross-border payment corridors continue to open up and stabilise, Africa will become a country while Lemonade Finance will remain the landmark for Africans in diaspora.
With the Lemonade Finance team eyeing an expansion to Ghana, we are excited to be partners on their ultimate journey to building the #1 cross-border payments platform for Africans in diaspora.
At Microtraction, our long term mission is to accelerate Africa’s transition to a sustainable and developed economy. We do this by investing in entrepreneurs who leverage technology, capital, and innovation to try and solve some of the largest problems on the continent. If you are working on solving one of these problems, we should talk!
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