African Startups should ditch Mercury Bank, Paypal and other foreign financial institutions.
This was the recent conversation arising as response to the recent blockades of African businesses accounts by foreign financial bodies.
In 2021, Paypal blocked accounts of of African customers, frustrating them.
Now, digital bank for startups, Mercury Bank has blocked many accounts of African startups.
This accounts blockade has sparked huge condemnation especially among Africans and Business owners.
Why Mercury Bank blocks African startups’ accounts:
Mercury bank launched in 2019.
It makes it possible for African startups and businesses to open a foreign bank account in the U.S without having a presence in America.
It is a San Francisco, California-based bank.
The bank claims it has over 4 billion in customer deposits from 40,000+ businesses.
It also said its customers are in over 200 countries.
In 2021, the firm was able to raise $120 million in a Series B funding round led by investment firm, Coatue.
This puts the bank’s valuation at $1.6 billion.
Meanwhile, Paypal had equally once played the role
However, like Paypal did in 2021, Mercury has equally blocked the accounts of Nigerian and other African’s startups.
The digital bank gave reasons for blocking the accounts in an email it sent to all its African customers.
According to the email by Immad Akhund, the firm’s CEO, Mercury Bank blocked the accounts over suspicion of fraud.
He said the bank observed some unusual activities taking place with the accounts and then, blocked them.
“Hi, your access to the Mercury account for [company’s name] has been temporarily restricted. Let us know if you have any question or concerns.”
The bank also told some startups that it is investigating their accounts over unusual activities.
” I am the CEO of Mercury.
“Since many of you have emailed/messaged me directly I thought it would be best if I just reached out directly.
“We found out yesterday that our partner bank noticed unusual activity and asked us to lock and investigate a large set of accounts with linked activity.
“We are working through our due diligence on all those accounts and will be in touch with you individually with questions if we have any on your account or activity.”
He further stated, “Since it’s a reasonably large set of accounts it’s taking us some time to work through all of them but it’s the highest priority for us internally and we have more than 10 people working on this.
“We apologize for this sudden inconvenience and hope to put better practices in place to avoid this in the future.”
This action y the bank has affected and keeps affecting many startups in Africa.
While the block is in place, all African startups who are the bank’s customers have lost access to their funds.
They have also lost access to financial transactions happening across international borders.
Africans decry action:
Meanwhile, the action by the international digital bank has met with condemnations from Africans and African startups and businesses.
The businesses have accused the bank of targeting African startups and businesses for racial discrimination.
Also, conversions along this line, as well as the need for Africans to have an international bank took centre stage.
Keep in mind that most African companies get foreign incorporation as a way to easily raise funds to scale.
This development has put them at the mercy of theses foreign financial institutions.
Consequently, this continuous and over-dependence on Western financial companies for international transactions has often disappointed them.
Also, like Paypal did when it blocked the accounts of Africans, Mercury Bank did not give very cogent reasons for blocking African startups’ accounts.
Multiple complaints from Africans who got affected said, the firm did not give any prior notice nor did it explain cogently why it took the decision.
For instance, co-founder of Andela and the former managing director of Flutterwave, Iyinoluwa Aboyeji, condemned the act by Mercury Bank.
He tweeted saying the time had come for Africans to have an African bank performing such functions like foreign financial institutions do.
“I hope the general restrictions placed on African startups by @BankMercury reminds everyone that there is no alternative to building our own.
“Let’s build a Nigerian International Finance Centre and buy offshore bank licenses so we can bank our $$.”