The Rise of Fintech Infrastructure in Africa: Stitch Secures $4 Million Seed Round

Globally, the number of fintech infrastructure providers has been steadily increasing in recent years. Within Africa, several startups have emerged over the past three years to address this growing need. Stitch, a fintech company based in South Africa, is among these innovators, and is now publicly announcing a $4 million seed funding round.

Introducing Stitch and its API Capabilities

Founded by Kiaan Pillay, Natalie Cuthbert, and Priyen Pillay, Stitch aims to deliver comprehensive API access to financial accounts throughout Africa, beginning with the South African market. The company’s API empowers developers to seamlessly connect applications to users’ financial accounts.

This connectivity enables users to securely share transaction histories and account balances, verify their identities, and initiate payments.

A Global Trend: The Proliferation of API-Led Financial Services

We are witnessing a significant expansion of financial services companies leveraging APIs worldwide. Plaid currently leads the market in the United States.

In Europe, Tink, a Swedish fintech, has established a strong presence, while Truelayer and Belvo are key players in the United Kingdom and Latin America, respectively.

Simplifying Financial Integration with APIs

These companies provide essential engineering and developer tools, reducing the complexities associated with connecting applications to financial accounts. Through APIs, they facilitate the integration of otherwise intricate services, allowing companies to build functionality with minimal coding effort.

Stitch's Impact on Financial Innovation

Similar to other financial infrastructure providers, Stitch’s services support innovation in areas such as personal finance, lending, insurance, payments, and wealth management.

The Founders’ Experience and the Genesis of Stitch

The founders bring valuable experience in developing API products for local markets to their work with Stitch. Kiaan Pillay previously served as the head of operations for Root, a South African insurance API platform, in 2017.

He later joined Smile Identity, a San Francisco-based identity API company, where he identified significant infrastructural challenges related to compliance and identity verification among fintechs across Africa.

During this time, Kiaan Pillay, Cuthbert – who was a software architect at Root – and Priyen Pillay began developing a Venmo-style wallet for Africa as a personal project. Eight months of attempting to connect to banks highlighted the infrastructural deficiencies hindering progress in African fintech.

“We initially explored manual methods to allow users to withdraw funds from their wallet to their bank accounts,” explains Kiaan Pillay to TechCrunch. “This was first done manually, then automated using screen scraping. We realized that this automated solution to a manual problem could be a product in itself, and that more refined approaches were possible.”

Building Stitch: Roles and Early Traction

This realization led the team to focus on Stitch, with Kiaan Pillay as CEO, Cuthbert as CTO, and Priyen Pillay as CPO. They commenced full-time work on the project in October 2019 and secured a pre-seed funding round the following month.

While operating in stealth mode, Stitch has already onboarded several clients, including Intelligent Debt Management, Momentum Velocity Club, and FlexClub. The company is also attracting interest from larger corporations developing consumer-facing products.

Stitch’s Product Suite and Revenue Model

Currently, Stitch offers both a data and identity API product, with a payment product scheduled for release this month. Like many API fintech startups, Stitch charges developers and companies based on the number of API calls made.

Additionally, for certain applications, such as budgeting or personal finance management tools, a fixed fee is also applied.

Future Expansion Plans

Backed by substantial investment, Stitch intends to consolidate its growth within South Africa. Plans are also underway to expand operations into West and East Africa.

The African Fintech Infrastructure Landscape is Experiencing Rapid Growth

The market for financial infrastructure in Africa is becoming increasingly competitive. Several startups, predominantly originating from Nigeria, are actively developing API fintech solutions. These companies have successfully secured substantial funding rounds backed by prominent investors.

Mono, a relatively new entrant having launched just six months prior, benefits from support from Y Combinator (YC). Okra is backed by TLcom Capital, a Pan-African venture capital firm. OnePipe has affiliations with Techstars, and Pngme, while based in the U.S., has garnered investment from EchoVC and Lateral Capital, both Pan-African VC firms.

Currently, the operational scope of these startups is generally limited to a maximum of two countries. For example, Mono, Okra, and OnePipe are presently functioning solely within Nigeria. Pngme operates in both Nigeria and Kenya, while Stitch is focused exclusively on South Africa.

The dynamics of competition and potential collaboration will be particularly interesting as these companies expand beyond their current markets. Expansion plans are already underway, with Okra currently in beta testing in Kenya and South Africa, and Mono intending to launch in Ghana and Kenya before year-end.

Founders within this space have expressed that competition can be a positive force for market development. Kiaan Pillay suggests that, over time, each company may specialize in a particular functionality where they excel.

“In contrast to the dominance of Plaid in the U.S., Africa likely requires multiple players,” Pillay explains. “Europe provides a good model, with numerous sizable companies offering comparable banking API services. We anticipate a trend where companies become recognized for their proficiency in specific areas, such as payments, data enrichment, or merchant identification.”

Stitch has secured a noteworthy seed funding round, led by firstminute Capital, a London-based venture capital firm, and The Raba Partnership, a U.S.-based investment firm. The investment includes participation from both funds and individual investors.

Participating funds include CRE, Village Global, Norrsken (founded by Klarna co-founder Niklas Adalberth), Future Africa (established by Flutterwave co-founder Iyinoluwa Aboyeji), and 500 Fintech. The angel investor group features Venmo co-founder Iqram Magdon-Ismail, founding members of Plaid, and executives from Coinbase, Revolut, Fast, and Paystack.

Pillay attributes the successful fundraising, despite the company being in stealth mode, to its established network in the U.S. and the strong belief investors have in the product’s potential.

“Our time spent in San Francisco while working with Smile facilitated connections with globally renowned founders and investors,” stated Kiaan Pillay. “We see a significant opportunity to deliver a new generation of financial services across African markets, and we are grateful for their support.”

Brent Hoberman, co-founder and general partner of firstminute capital, explained the firm’s decision to invest in Stitch stems from the belief that most online businesses in Africa will integrate fintech capabilities into their applications. This integration will facilitate online payments, expand lending capacity, and streamline KYC and identity verification processes through Stitch.

“As a South African native, I am pleased to collaborate with an exceptionally skilled team of local engineers with ambitions across the African continent,” he added.

The African fintech sector is gaining momentum following a quieter January, where agritech and cleantech sectors received the majority of funding. This week, TymeBank, a South African digital bank, raised $109 million to expand its operations within South Africa and into Asia, mirroring the substantial funding rounds seen previously in this sector, which accounted for over 30% of venture capital funding.

Stitch’s seed round represents the latest in a series of significant deals within the African API fintech space over the past two years. Major players in this space have each raised between $500,000 and $4 million.

This article was updated to accurately reflect Brent Hoberman’s role at firstminute capital and the headquarters of The Raba Partnership.