Anchor, a Nigerian banking-as-a-service (BaaS) provider, has raised $2.4 million in seed investment. Justin Kan’s Goat Capital led the financing round which also welcomed participation from FoundersX, Rebel Fund and some existing investors, including Y Combinator and Byld Ventures. 

The fintech emerged from stealth a year ago with over $1 million in pre-seed funding. Its proposition was straightforward: provide APIs, dashboards, and tools to assist developers in embedding and building banking solutions. Anchor is one of a few BaaS providers in the Nigerian market; it competes in a crowded fintech space that includes JUMO, Maplerad, OnePipe and Bloc.

Incumbent banks have been lazy in bringing their services up to speed in a rapidly changing digital banking world. Consequently, these platforms have been popular with neobanks and other businesses that seek to embed financial services within their products. Now, platforms offering banking-as-a-service perceive an opportunity to deliver more personalized services and flexibility at a lower cost. They assist these firms in providing bank accounts, payments, savings, and cards.

Anchor partners with regulated banking institutions. By doing this, it claims to help businesses shorten the process of building banking products from years to days. The fintech catered to only customer accounts when it first launched. However, according to Anchor co-founder and CEO Segun Adeyemi, Anchor’s APIs now support business accounts, card issuance, bill payments, bulk disbursements, cross-border payments, and developer-only features such as an audit log system and developer webhooks.

“If you look at the scope of product today, even though there were a few other players that have been in the market before us, there is no one that has the scope of offering that we have in the market today,” the CEO who founded Anchor with Olamide Sobowale and Gbekeloluwa Olufotebi told TechCrunch on a call. “This can be validated by looking at the scope of our offerings and comparing them to what similar companies do today.”

Anchor went live in August last year with roughly 30 clients in various onboarding phases. Its current total is around 270, with approximately 63 of these firms online and actively transacting on the platform. Its clientele includes fintechs, SaaS firms, e-commerce enterprises/marketplaces, and other tech-enabled businesses. Bujeti, Pennee, SeamlessHR, LifeBank, Waza, and Zit.ng are a few of its customers.

So far, the YC-backed fintech claims to have generated more than $550 million in annualized total transaction volume (TTV) by enabling fintech services for these enterprises. Likewise, it is increasing revenue by 30% month-on-month, according to the chief executive. Processing fees, issuance fees for accounts and cards, and interest income on the float generate revenue for the firm.

Online onboarding of non-digital native firms increases financial inclusion. As a result, emerging fintechs have sought to address financial inclusion with their services. For Anchor, its initial objective was to encourage embedded financing for big supermarkets and multinationals in Nigeria. According to Adeyemi, the startup recognized a huge potential to connect these companies online and power their financial service offerings. But it didn’t go as planned.

“We realized they weren’t digitally ready yet,” said the chief executive. “We figured that most of them would take three to four years to properly onboard or even get them to the stage where they can maximize their accounts with embedded finance. As a startup, we had to realize we didn’t have the luxury of waiting for customers. So, we had to change and hyper-focus on digitally ready and tech-enabled businesses.”

A significant growth channel in the works

That was one of the most noteworthy lessons the market taught Anchor after its first year, according to Adeyemi. Others include determining proper pricing, developing revenue sources positively affecting customers’ bottom line and re-engineering its compliance processes. Therefore, the one-year-old fintech will double focus in these areas following this funding injection. “We want to improve our end-to-end compliance system, invest in value-added products like our ledger system, and onboard more customers,” explained Adeyemi.

The global embedded finance market will be worth $384.8 billion by 2029. Africa will account for 10% of this industry, with Anchor stating it’s serving a $7 billion addressable market in Nigeria. There are various growth avenues Anchor could tap into to capture market share. Above all is its recent partnership with the fintech arm of Nigeria’s largest telecom, MTN.

Meanwhile, the startup is also in very early discussions of exploring pan-African expansion, one reason why Kan, partner at lead investor Goat Capital, is bullish about the startup. “The embedded finance market in Africa is nascent but growing fast at over 30% CAGR,” said Kan. “Anchor’s growth rate is impressive and showing signs of becoming the category leader, which is something we look out for in our portfolio companies.”