OnePipe, a Nigerian fintech API company, has secured $3.5 million in venture funding to expand embedded finance offering, joining a host of API infrastructure players in Africa executing multi-million dollars financial services.
The seed round was co-led by African impact-focused VC Atlantic Ventures, who also co-led OnePipe’s $950,000 pre-seed round. New investors include Canaan Partners, Saison Capital, Norrsken and the Fund and Two Culture Cap. Existing investors who participated are Chris Adelsbach, Techstars, Ingressive Capital, Acquity, P1, Raba and DFS Lab and other angel investors.
OnePipe had planned to include developing an API gateway that would connect banks and fintechs using a common standard, allowing the company to execute essential open banking functions.
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But the plan changed after OnePipe had established agreements with a number of financial institutions. The financial startup made the decision to take a step back and explore the area of embedded finance.
Currently, there are six banks on board as OnePipe’s financial partners.
Using OnePipe’s API platform, non-financial companies can launch and cross-sell a variety of financial services such as credit, accounts, and payments within their offers.
The fintech company raised a round of funding last year to focus on one use case of the relationship, which was to gather together the APIs of a defined set of banks and deliver embedded banking or banking as a service to customers. Non-financial institutions, or businesses in general, are able to offer banking services to their consumers as a result of its services. Customers can pay off their accounts and access credit when they need it by using OnePipe’s bank API.
OnePipe has handled more than 6.3 million transactions worth a total of $46.3 million in the ten months after switching to this model, based on the company’s statistics. From FMCG and retail to lending and agriculture, these data represent over 1 million individual accounts.
In exchange for processing transactions on these accounts, OnePipe receives a percentage of the proceeds, which it distributes to its partner banks. OnePipe takes at least 1% of the loan interest from its lending partners and divides it with businesses and partner banks.
For its expansion into additional African countries, OnePipe has entered into a strategic relationship with African logistics and freight firm Sendy, according to Ope Adeoye, the company’s founder and CEO. The company officials said they plan to form a “Stripe-Shopify-like tag group.”
The CEO explained that the company went into other African countries with a customer on the ground first. “We did a deal with Sendy that made them participate in this round, and we will then deploy the capital for expansion.” As they deploy to Egypt and South Africa, Onepipe is sure it will involve and observe from them.
There are generally three main fintech API infrastructure plays. One is data and financial accounts aggregation, where Plaid, Okra, Mono, Stitch and Pngme play.
The second is embedded finance and banking as a service, where Treasury Prime, Marqeta have taken a space. And the third is core open banking pioneered by the likes of TrueLayer. OnePipe has chosen embedded finance for reasons that Adeoye explained.
“The caveat goes like this, the moment you make a positioning play for banking as a service, all you really need is one partner bank that lets you go deep because the embedded finance [offering] is about depth and not breadth,” said the CEO.
“If you go for data aggregation or open banking in general, then you are going for breadth, not depth. So on our side, we said we’d rather go with tier two and tier three bands, where once you describe the concept to them, they get it. It powers their growth and is more valuable to them, unlike other larger financial institutions.”
Running API infrastructure on behalf of partner banks and helping them monetize it helps OnePipe to work with non-financial institutions to launch and cross-sell an array of financial services such as credit, accounts and payments within their offerings.