Fintech

Founded in war-torn Sudan, Elevate, backed by YC, now provides fintech to freelancers around the world

Published

8 months ago

6 June, 2024

Founded in war-torn Sudan, Elevate, backed by YC, now provides fintech to freelancers around the world

In early 2022, fintech startup Bloom, not to be confused with the Investment app focused on Generation Zor the Heavily capitalized revenue financing platform – era accepted into Y Combinator as the first Sudanese startup to participate in the famous accelerator. Beyond its four founders’ backgrounds at Amazon, Meta, IBM and Goldman Sachs, the startup’s premise was also notable and vital: helping Sudanese people protect their wealth.

Now, after a limited initial launch, a major political upheaval in its home country, a turnaround, a little fundraising and a rebranding for Elevatethe startup is now open to general availability, at least in some emerging markets.

Primarily targeting people in East and Northern Africa, particularly Sudan, Elevate had initially created a product to protect against the growing devaluation of those users’ national currencies via “high-yield” savings accounts, free FX, and adjacent digital banking services – all based on the US dollar.

The problem Elevate was targeting is widespread. Inflation and currency devaluation have long been concerns for Africans who use bank accounts (one reason why the number of unbanked citizens here is higher than in more developed countries). In 2022-2023, the sub-Saharan region experienced typical devaluations of 8% (with depreciations exceeding 40% in some countries) according to the IMFAND ratings that analysts expect the picture will be the same this year.

Elevate initially it aimed to build a pan-African neobank which would integrate into local banks and wallets across the region, a USD banking add-on that could support receiving and saving USD remittances from friends, family and employers. In addition to Sudan, it has also targeted Ethiopia, Uganda and Tanzania for initial deployments.

“We are from the region, we understand the nuances of our markets and can navigate what can seem like an ambiguous landscape. I would also like to add that we are comfortable, perhaps even thriving, working in volatile markets. We are supporting the next decade of growth in Africa,” Abdigani Diriye, one of Elevate’s founders, said at the time.

Sudan’s first YC-backed startup is helping consumers protect and grow their wealth

Building in a volatile market

Between late 2021 and mid-2022, Elevate (then called Bloom) launched its first series of products to 100,000 people and has secured initial funding of $6.5 million from YC, Visa, Global Founders Capital and prominent angels such as Dropbox co-founder Arash Ferdowsi and former N26 CEO Nicolas Kopp.

But that initial phase took place in the midst of a much larger drama: Sudan itself was undergoing a major coup while a civil war lurked in the wings. Under the strong arm of a military junta, Prime Minister Abdalla Hamdok was deposed, kidnapped and then reinstated before resigning, all in the space of less than three months.

In the wake of that chaos, Diriye and CEO Ahmed Ismail left for personal reasons. Elevate has remained committed to the region and has found a pivot.

Youcef Oudjidaneanother cofounder who now runs the company with a fourth cofounder Khalid Keenansaid in a recent interview with TechCrunch that while on the ground in Sudan and Ethiopia, the founders discovered a particular demographic of users for their USD vision: the booming freelance and remote work sector .

Across Africa and other emerging markets, there has been an increase in younger workers with technical and language skills finding work via freelance platforms Upwork and Fiverr. For them, the difficulty wasn’t opening local USD accounts; has cost-effectively facilitated payments from international employers and online platforms.

“Using local products has meant that many remote workers have seen much of their earnings eaten away by excessive fees. The solution was obvious. USD products could not be local,” said Oudjidane, who is also the founding partner of emerging markets fintech fund Byld Ventures. “The product should move to offering US-based USD accounts,” accounts that would, crucially, facilitate ACH payments to enable those freelance payments and come with the security you get with the US banking system, such as FDIC insurance.

Market pivot

Further political instability in Ethiopia and the eventual outbreak of conflict in Sudan in 2023 accelerated Elevate’s pivot. By then, fintech had re-evaluated which markets it would serve; they needed a large population of freelancers and remote workers in emerging markets who were likely working for clients further afield and struggled with the payment issues the team had encountered in East Africa. Based on these factors, Elevate chose Egypt, Pakistan, the Philippines and Bangladesh.

“Remote workers who need to save dollars have a few options: Choose an FDIC-insured account or a wallet, the latter of which poses a risk if the provider collapses, resulting in a loss of deposits. The core of our business model revolves around providing this protection. There is also a need for a remittance service that goes beyond traditional US dollar accounts with expensive SWIFT transfers to offer FX transfers at very low costs,” Keenan said.

“Incumbents like Payoneer do not provide FDIC insurance and often charge high exchange rates, up to 3% in some markets. Therefore, a significant part of our model focuses on reducing exchange rates, similar to what Wise has done, and continuing to push for more favorable conditions for remote workers.”

Since its launch earlier this year, Elevate, which makes it easier for non-US residents to receive payments from US employers and platforms such as Upwork, Toptal, Fiverr and Deel (one of its acquisition partners of customers), has enrolled over 150,000 people in its new markets. The San Francisco-based fintech provides these financial services by partnering with sponsor bank Bangor Savings Bank. Its products are similar to those of other African fintechs, including Gray and Cleva.

Sudanese fintech Bloom nabs $6.5M, backed by Y Combinator, GFC and Visa

What is the future of Elevate?

Elevate’s strategy shift and partner bank change from an Egyptian entity overlapped with the move from Visa to Mastercard. As a result, the fintech did not fully leverage Visa’s milestone-based investment. However, the founders do not rule out the possibility that the Visa network could support some of the fintech’s future products, such as prepaid and local cards.

The YC-backed company currently generates revenue from net interest, FX and card trading. It also plans to launch savings and investment products in the coming months. According to Oudjidane, the company is close to profitability with sufficient funds in the bank, having run a lean operation and spent approximately $2 million since its inception.

However, that hasn’t stopped the fintech from raising a new pre-Series A round of $5 million, with 80% debt, from Dubai-based investment fund Negma Group, to fuel its expansion into markets like Indonesia, South Africa and Turkey.

Before war broke out in Sudan, even though its backing of single-digit millions appears incredibly modest compared to some of its developed world counterparts, Elevate was one of the most highly funded startups. Local technology observers subsequently expected its success, along with that of Alsoug supported by Fawryto draw more attention to Sudan’s nascent tech startup ecosystem, which had just begun to attract global investors after 30 years of international sanctions.

But things didn’t go that way. While other startups, with few resources, have remained despite the conflict, Elevate, which has the luxury of serving consumers in multiple markets, will only re-establish a physical headquarters in the country when political stability returns.

“Freelancers and remote workers in these markets will undoubtedly be a key source of foreign income to help rebuild,” Oudjidane said.

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Once serving war-torn Sudan, YC-backed Elevate now provides fintech to freelancers around the world

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Fintech

US Agencies Request Information on Bank-Fintech Dealings

Published

6 months ago

30 July, 2024

FinCrypt Staff

Federal banking regulators have issued a statement reminding banks of the potential risks associated with third-party arrangements to provide bank deposit products and services.

The agencies support responsible innovation and banks that engage in these arrangements in a safe and fair manner and in compliance with applicable law. While these arrangements may offer benefits, supervisory experience has identified a number of safety and soundness, compliance, and consumer concerns with the management of these arrangements. The statement details potential risks and provides examples of effective risk management practices for these arrangements. Additionally, the statement reminds banks of existing legal requirements, guidance, and related resources and provides insights that the agencies have gained through their oversight. The statement does not establish new supervisory expectations.

Separately, the agencies requested additional information on a broad range of arrangements between banks and fintechs, including for deposit, payment, and lending products and services. The agencies are seeking input on the nature and implications of arrangements between banks and fintechs and effective risk management practices.

The agencies are considering whether to take additional steps to ensure that banks effectively manage the risks associated with these different types of arrangements.

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Fintech

What changes in financial regulation have impacted the development of financial technology?

Published

6 months ago

30 July, 2024

FinCrypt Staff

Exploring the complex landscape of global financial regulation, we gather insights from leading fintech leaders, including CEOs and finance experts. From the game-changing impact of PSD2 to the significant role of GDPR in data security, explore the four key regulatory changes that have reshaped fintech development, answering the question: “What changes in financial regulation have impacted fintech development?”

PSD2 revolutionizes access to financial technology
GDPR Improves Fintech Data Privacy
Regulatory Sandboxes Drive Fintech Innovation
GDPR Impacts Fintech Data Security

PSD2 revolutionizes access to financial technology

When it comes to regulatory impact on fintech development, nothing comes close to PSD2. This EU regulation has created a new level playing field for market players of all sizes, from fintech startups to established banks. It has had a ripple effect on other markets around the world, inspiring similar regulatory frameworks and driving global innovation in fintech.

The Payment Services Directive (PSD2), the EU law in force since 2018, has revolutionized the fintech industry by requiring banks to provide third-party payment providers (TPPs) with access to payment services and customer account information via open APIs. This has democratized access to financial data, fostering the development of personalized financial instruments and seamless payment solutions. Advanced security measures such as Strong Customer Authentication (SCA) have increased consumer trust, pushing both fintech companies and traditional banks to innovate and collaborate more effectively, resulting in a dynamic and consumer-friendly financial ecosystem.

The impact of PSD2 has extended beyond the EU, inspiring similar regulations around the world. Countries such as the UK, Australia and Canada have launched their own open banking initiatives, spurred by the benefits seen in the EU. PSD2 has highlighted the benefits of open banking, also prompting US financial institutions and fintech companies to explore similar initiatives voluntarily.

This has led to a global wave of fintech innovation, with financial institutions and fintech companies offering more integrated, personalized and secure services. The EU’s leadership in open banking through PSD2 has set a global standard, promoting regulatory harmonization and fostering an interconnected and innovative global financial ecosystem.

Looking ahead, the EU’s PSD3 proposals and Financial Data Access (FIDA) regulations promise to further advance open banking. PSD3 aims to refine and build on PSD2, with a focus on improving transaction security, fraud prevention, and integration between banks and TPPs. FIDA will expand data sharing beyond payment accounts to include areas such as insurance and investments, paving the way for more comprehensive financial products and services.

These developments are set to further enhance connectivity, efficiency and innovation in financial services, cementing open banking as a key component of the global financial infrastructure.

Sebastian Malczyk

General Manager, Technology and Product Consultant Fintech, Insurtech, Miquido

GDPR Improves Fintech Data Privacy

Privacy and data protection have been taken to another level by the General Data Protection Regulation (GDPR), forcing fintech companies to tighten their data management. In compliance with the GDPR, organizations must ensure that personal data is processed fairly, transparently, and securely.

This has led to increased innovation in fintech towards technologies such as encryption and anonymization for data protection. GDPR was described as a top priority in the data protection strategies of 92% of US-based companies surveyed by PwC.

Arid Islam

Financial Expert, Sterlinx Global

Regulatory Sandboxes Drive Fintech Innovation

Since the UK’s Financial Conduct Authority (FCA) pioneered sandbox regulatory frameworks in 2016 to enable fintech startups to explore new products and services, similar frameworks have been introduced in other countries.

This has reduced the “crippling effect on innovation” caused by a “one size fits all” regulatory approach, which would also require machines to be built to complete regulatory compliance before any testing. Successful applications within sandboxes give regulators the confidence to move forward and address gaps in laws, regulations, or supervisory approaches. This has led to widespread adoption of new technologies and business models and helped channel private sector dynamism, while keeping consumers protected and imposing appropriate regulatory requirements.

George Blandford

Co-founder, UK Linkology

GDPR Impacts Fintech Data Security

A big change in financial regulations that has had a real impact on fintech is the 2018 EU General Data Protection Regulation (GDPR). I have seen how GDPR has pushed us to focus more on user privacy and data security.

GDPR means we have to handle personal data much more carefully. At Leverage, we have had to step up our game to meet these new rules. We have improved our data encryption and started doing regular security audits. It was a little tricky at first, but it has made our systems much more secure.

For example, we’ve added features that give users more control over their data, like simple consent tools and clear privacy notices. These changes have helped us comply with GDPR and made our customers feel more confident in how we handle their information.

I believe that GDPR has made fintech companies, including us at Leverage, more transparent and secure. It has helped build trust with our users, showing them that we take data protection seriously.

Dr. Rhett Stubbendeck

CEO & Co-Founder, Leverage Planning

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Fintech

M2P Fintech About to Raise $80M

Published

6 months ago

30 July, 2024

FinCrypt Staff

Application Programming Interface (API) Infrastructure Platform M2P Financial Technology has reached the final round to raise $80 million, at a valuation of $900 million.

Specifically, M2P Fintech, formerly known as Yap, is closing a new funding round involving new and existing investors, according to entrackr.com. The India-based company, which last raised funding two and a half years ago, previously secured $56 million in a round led by Insight Partners, earning a post-money valuation of $650 million.

A source indicated that M2P Fintech is ready to raise $80 million in this new funding round, led by a new investor. Existing backers, including Insight Partners, are also expected to participate. The new funding is expected to go toward enhancing the company’s technology infrastructure and driving growth in domestic and international markets.

What does M2P Fintech do?

M2P Fintech’s API platform enables businesses to provide branded financial services through partnerships with fintech companies while maintaining regulatory compliance. In addition to its operations in India, the company is active in Nepal, UAE, Australia, New Zealand, Philippines, Bahrain, Egypt, and many other countries.

Another source revealed that M2P Fintech’s valuation in this funding round is expected to be between USD 880 million and USD 900 million (post-money). The company has reportedly received a term sheet and the deal is expected to be publicly announced soon. The Tiger Global-backed company has acquired six companies to date, including Goals101, Syntizen, and BSG ITSOFT, to enhance its service offerings.

According to TheKredible, Beenext is the company’s largest shareholder with over 13% ownership, while the co-founders collectively own 34% of the company. Although M2P Fintech has yet to release its FY24 financials, it has reported a significant increase in operating revenue. However, this growth has also been accompanied by a substantial increase in losses.

Source

Fintech

Scottish financial technology firm Aveni secures £11m to expand AI offering

Published

6 months ago

30 July, 2024

FinCrypt Staff

Aveni, Investment Management, AI, NLP, UK

By Gloria Methri

Today

To come
Aveni Assistance
Aveni Detection

Artificial intelligence Financial Technology Aveni has announced one of the largest Series A investments in a Scottish company this year, amounting to £11 million. The investment is led by Puma Private Equity with participation from Par Equity, Lloyds Banking Group and Nationwide.

Aveni combines AI expertise with extensive financial services experience to create large language models (LLMs) and AI products designed specifically for the financial services industry. It is trusted by some of the UK’s leading financial services firms. It has seen significant business growth over the past two years through its conformity and productivity solutions, Aveni Detect and Aveni Assist.

This investment will enable Aveni to build on the success of its existing products, further consolidate its presence in the sector and introduce advanced technologies through FinLLM, a large-scale language model specifically for financial services.

FinLLM is being developed in partnership with new investors Lloyds Banking Group and Nationwide. It is a large, industry-aligned language model that aims to set the standard for transparent, responsible and ethical adoption of generative AI in UK financial services.

Following the investment, the team developing the FinLLM will be based at the Edinburgh Futures Institute, in a state-of-the-art facility.

Joseph Twigg, CEO of Aveniexplained, “The financial services industry doesn’t need AI models that can quote Shakespeare; it needs AI models that deliver transparency, trust, and most importantly, fairness. The way to achieve this is to develop small, highly tuned language models, trained on financial services data, and reviewed by financial services experts for specific financial services use cases. Generative AI is the most significant technological evolution of our generation, and we are in the early stages of adoption. This represents a significant opportunity for Aveni and our partners. The goal with FinLLM is to set a new standard for the controlled, responsible, and ethical adoption of generative AI, outperforming all other generic models in our select financial services use cases.”