Let’s say you’re a freelance engineer in Nigeria working for a U.S. company; how do you facilitate forex conversion from dollars to naira? I bet it involves using a third party or a local Bureau De Change, essentially a foreign currency exchange office.
Some people have worked with this model for years not because it’s perfect but other options are limited. A few issues using third parties or a Bureau De Change, or BDC as commonly known in Nigeria, include inflated rates, you can only access them for specific hours, proximity and there are chances you’d get cheated.
An online BDC would do away with these issues; that’s the premise of the currency exchange platform Grey. The company — which recently changed its name from Aboki Africa in a bid to use a more international-friendly moniker — launched as an instant exchange service. Today, it is announcing that it has been accepted into Y Combinator’s Winter 2022 startup batch.
The startup also recently raised an undisclosed amount of pre-seed funding from Ingressive Capital and Abdul Hassan, co-founder and CEO of Mono and other investors.
Idorenyin Obong and Femi Aghedo launched Grey in July 2020. The simple problem they wanted to solve, which they faced, was to help Nigerians exchange the foreign currencies in their domiciliary accounts to local currency — which is the naira.
Obong has worked remotely for international companies for most of his career, so he always received a constant flow of dollars into his domiciliary accounts. But when the time came to exchange, he had to go to the bank, withdraw cash and meet a BDC operator who would travel long distances for one transaction.
“It would literally take the entire day,” Obong, the chief executive officer, told TechCrunch on a call. “So we set out to build an MVP so everybody who has a domiciliary account would be able to exchange that foreign currency to naira. And then everybody who had naira and wanted foreign currency should be able to get it in their domiciliary accounts.”
Here’s how the first version worked: A user pays naira or dollars into a designated Grey naira or dollar account through multi-channel payment gateways. Then, the platform’s ‘automated system bullet’, working with an offline BDC, pays the currency equivalent to the customer’s designated local naira or dollar account.
But in building the first product and getting feedback, the founders found that receiving funds from abroad was still a complex problem for some customers. Not only do opening and expecting inflows into domiciliary accounts take days to weeks, but it also became an issue for customers to make inter-and intra-bank dollar transfers due to some policies set by the country’s Central Bank.
After five months of iteration, Grey pivoted in July 2021 to provide virtual international bank accounts, in EUR, GBP and USD, to Nigerians. The accounts are domiciled abroad, not affected by local jurisdiction or regulation. So when users receive money there, they can swap it to their local currencies and pay it out to their bank accounts. Grey Finance said customers can also send money to the U.K. or the EU by making deposits in naira and converting to euros or pounds via its website.
While some customers use these accounts, others still exchange currency from their cards or domiciliary bank accounts with limited bank partners supporting foreign exchange transfers in Nigeria.
Grey has grown to transact north of $1 million monthly. It takes a 1% transaction fee capped at N3,000 (~$6). About traction, Obong told TechCrunch that from December 2021 to January 2022, the company’s monthly users increased by 36% to 12,000 while revenue went up by 64%.
The provision of virtual foreign bank accounts has become a common strategy for fintechs trying to help Nigerians and Africans facilitate international transfers. Some other startups offering similar services include Techstars-backed PayDay and Fincra.
Grey Finance is one of the many African startups to have gotten into YC W22, which is set to be the largest batch for African startups yet. Obong said the next goal for his company is to attend to multiple requests from users who want to use mobile apps instead of the platform’s predominant web interface as well as launch virtual and physical foreign-denominated cards.