In a major development in the world of open banking, South African fintech, Stitch, has secured $25 million in an extension round of funding, moving it into a prominent position within the payments segment. This funding round was led by global fintech investor Ribbit Capital and saw participation from existing backers, including CRE Ventures, PayPal Ventures, and the Raba Partnership.
Stitch, headquartered in Cape Town, has carved out a niche for itself by offering an “end-to-end payments solution” tailored to meet the challenging and ever-evolving payment needs of enterprise clients. The company’s primary focus is empowering businesses to develop, enhance, and expand their financial products. They achieve this by providing crucial API (Application Programming Interface) gateways that enhance online payment conversion rates and optimize the payment operations of their clients.
Open banking, characterized by traditional banks opening up their data through application programming interfaces (APIs), has been a game-changer in the global payments landscape over the past decade. Africa, in particular, has witnessed rapid adoption of this innovation, as businesses leverage APIs to access customers’ financial accounts and deliver a wide range of integrated and embedded financial services.
Stitch’s latest funding injection brings its total Series A funding to an impressive $46 million. The company said this buttresses its commitment to driving innovation and growth within the open banking and payments sphere. As open banking continues to reshape the financial services landscape, Stitch’s strategic position and fresh funding are poised to make waves in the industry.
Ribbit Capital leads Stitch’s $25 million investment
Ribbit Capital, a global fintech investor, is making its mark in Africa with its third investment on the continent, leading the charge in Stitch’s $25 million extension funding round. This move follows Ribbit Capital’s leadership in Chipper Cash’s $30 million Series B and Wave’s $200 million Series A.
Kiaan Pillay, Co-founder and CEO of Stitch expressed gratitude for the support of both local and international backers since the company emerged from stealth mode in 2021. While Stitch’s earlier investors shared the vision of tapping into a vast market opportunity, Pillay acknowledged that as the company enters a growth phase, demonstrating robust growth figures becomes paramount, particularly in a period of venture capital slowdown.
Pillay emphasized the alignment of strong traction and preexisting relationships as instrumental in attracting Ribbit Capital as the lead investor and successfully closing the funding round. He noted the significance of hard numbers for investors like Ribbit, whose team had been familiar with Stitch for some time.
“It was a good happenstance that we finally started to find traction in a world where hard numbers are significant for investors like Ribbit, whose team we’ve known for a while,” he said.
The company is on track to process more than 50 million transactions, amounting to $2 billion in total payment volume (TPV) this year, spanning seven product features introduced since early 2022.
Stitch has transformed from a quasi-data, quasi-bank-to-bank payments platform to a full-fledged payment service provider. The company’s offerings now include the ability for customers to accept payments through various methods, manage and reconcile payments across multiple channels, providers, and geographies using the PayOS dashboard, and disburse funds efficiently.
The fintech primarily caters to enterprise businesses in South Africa, counting MTN, Multichoice, the Foschini Group (TFG), Standard Bank’s SnapScan, and Yoco among its clients. Nevertheless, it also serves startups and small businesses in Nigeria and other African nations where it holds licenses. Stitch competes with rivals such as Mono, Okra, Revio, and MoneyHash, while also collaborating with global payment service provider partners and exploring potential partnerships with global consumer internet companies.
“We moved away from being a single method platform to a next-generation PSP for local and global enterprises,” said the CEO who founded Stitch with Natalie Cuthbert and Priyen Pillay. Moreover, Stitch has evolved from offering basic pay-in features to providing a comprehensive payment solution that includes a layer for managing payment methods across different banks and handling payouts like disbursements, refunds, and withdrawals.
This all-in-one solution is particularly appealing to global companies seeking to enter the African market. South Africa serves as a gateway to the continent due to its functional credit card system, making it a straightforward integration point.
However, Stitch’s value proposition becomes evident when addressing the need for alternative payment methods in regions where card usage is less prevalent. The company’s product features were developed in response to demands from local enterprise clients and are adaptable to the needs of global clients, making Stitch a versatile player in the payment space.
According to Pillay, “We find ourselves operating in a space that was somewhat unexpected for us. However, due to significant demand from prominent merchants for additional products, it has become a more accessible arena for us to enter and expand within.”
Stitch, which emerged from stealth mode in 2021, asserts that its platform delivers enhanced reliability, increased uptime, and faster issue resolution by establishing direct connections with banks and networks, eliminating intermediaries. Beyond its open banking capabilities, it offers customer support, including localized insights into the payment landscape and the development of tailored solutions designed to simplify the processes of sending, receiving, and managing funds.
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