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Lemonade Finance raises funding to ease payment for Africans abroad

Lemonade’s co-founders, Rian Cochran (L) and Ridwan Olalere (R)

Despite multiple international remittance products available for Africans to move money in and out of the continent, processing international payments is still far from painless.

That’s why Lemonade Finance, a Nigerian startup that wants to ease the payment process for Africans in North America and Europe, was founded. 

To extend its services to more Africans in the diaspora, the startup has just raised $725,000 in pre-seed funding, with participation from Y Combinator and the venture capital firms, MicrotractionVentures Platform and Acuity Venture Partners, among several other individual investors. 

Founded in October 2020 by Ridwan Olalere, who left his job as Country Head of Uber Nigeria, and Rian Cochran, former Director of Finance at Opera Software AS, Lemonade Finance was built to be “a borderless money app for Africans”.

One of its investors, Dayo Koleowo, Managing Partner at Microtraction, says “Lemonade’s solution is very timely. As a multi-currency financial service provider, they make it easy for the African diaspora to send and receive money from their new country of residence, which is remarkable. We believe Rian and Ridwan have the technical and financial know-how to provide the number one cross-border neobank for Africans in the diaspora.”

Do we need yet another remittance solution?

When Africans want to send or receive money to or from their family, dependents, children studying overseas, or businesses domiciled in Africa, they have few options and encounter problems.

Before Lemonade, Western Union, PayPal and MoneyGram are some of the products Africans already use to process payments. But these options are typically expensive, take weeks to process payments and restrict customers from certain locations from using their services. For example, PayPal allows Africans living in Africa to receive but not send money. 

With Lemonade, users do not have to go to the bank, and within minutes, they can send and receive payment.

Africans need access to more than one currency

To allow Africans to use their money seamlessly, Lemonade Finance has provided them with access to currencies that matter to them, notably the currency of the country they are in and that of their home country.

This is a big deal for Africans in the diaspora who have businesses in Africa but want to move their money in foreign currencies. Currently, if an African wants to change their foreign currency to that of the home currency in order to, for example, pay for their parents’ healthcare, they have to deal with unfavourable rates and the length of time it takes for the exchange to take place. 

Olalere and Cochran say that the flexible solution Lemonade provides is intentional and at the core of the team’s thinking in building the app.

“Before now, when Africans living in Africa moved to the diaspora, they could only create a bank account with the currency of their new country or the US dollar. While some can use their phone numbers to operate an African bank account, like with Guaranty Trust Bank (GTB), others have to travel back home to renew their token,” said Olalere. 

Image source: Lemonade Finance

Lemonade Finance wants to ensure that a Nigerian who resides in the UK, for instance, can open a Nigerian account and save money in naira as well as pounds without leaving the UK.

Lemonade Finance faces regulatory and compliance problems. The startup has to go the extra mile to prove they are worthy of licenses in European and North American countries. This is because global banks have put African countries on a restricted list, preventing individuals and payments companies from sending money to Africa. 

But Lemonade Finance is dedicated to letting global banks know that lowering financial barriers into Africa is a beneficial and strategic move.  They have been able to get some of their partner banks to green-light Nigeria, Kenya, Cameroon and some other West African countries. Yet, even as these global banks have enabled this financial access, they charge customers making transactions to African countries a higher fee. They also place restrictions on the number of days or hours it takes for the money to reach Africa. 

“On a daily basis, what we are constantly doing is fighting for everyday Africans to be globally included financially,” Olalere said. 

Olalere revealed that the company’s biggest milestone happened earlier this year when they acquired a license in the UK, approved by the FCA, without stepping foot in the UK.

This is why this funding round, according to Olalere, is important. It will help them upgrade and get new licences like the VMI license that allows them to hold wallets. This funding round will also help them hire for roles in the regulatory and compliance department, which will ultimately increase their customer base and allow them to reduce fees for customers. 

Currently, Lemonade Finance is only live in Canada, where it has gained thousands of customers already. In a few weeks, it will allow users in the UK to send and receive money from Ghana and Kenya; and in December, users in the US will be able to send and receive money from over 10 African countries at once. 

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