Mercury bank, an online bank located in San Francisco, California designed to help small companies (start-ups) manage their cash flow better, just recently restricted several accounts linked to African tech start-ups. The number of companies affected by the restriction remains unknown. Information gotten from a few sources disclosed that companies affected, range from 12 to 30. According to those affected, Mercury bank did not give any prior notice as to why they carried out this action, nor did they give an explanation why the action was taken on the affected start-ups.
Upon persistent questioning, Mercury Bank which holds over $4 billion in customer deposits for its 40,000+ businesses in over 200 countries, later disclosed that some of the affected start-ups got their account was flagged and placed under review by its compliance team after it noticed some “unusual activity” and couldn’t provide further details until it’s review are complete. Displeased with these restrictions, a couple of tech founders and stakeholders had to directly send a mail to Mercury CEO Immad Akhund, asking him what the issue was and also stating that they need the issue resolved immediately.
The CEO however responded, stating that their partner bank noticed an unusual activity, and instructed Mercury Bank to lock and investigate a large set of accounts linked with such activity. He however assured them that they are currently working on the issue and hopefully all restrictions will be removed.
These restrictions sparked mixed reactions from Twitter, where a couple of Tech founders insinuated that the restrictions might be linked to the ongoing conflict between Russia and Ukraine, which has seen the company’s partner bank review its exposure to “high risk” regions such as Africa.
Although Mercury has reached out to affected start-ups, stating that its intention wasn’t to single out the founder or start-up. But considering how most of the complaints seem to be coming from the African region as compared to other regions, it is hard to think that these start-ups in Africa are not prime targets. This is not a good look for start-ups affected, as nearly $3k estimated in return check fees for checks were already sent out before the restrictions. Will these companies be compensated for these losses accrued? One can only imagine.
This act indeed should be a wake-up call to African startups. It is high time they build their finance system and regulate their global fintechs. They need to get to the point where they don’t have to raise capital overseas. Self-reliance looks like the ideal solution. The restrictions should be a reminder to Nigerian Tech CEOs and stakeholders that there is no other perfect alternative than to build their own International Finance center and buy offshore bank licenses so start-ups can bank their money.
Truth be told, Africa especially Nigeria is more of a consumer, than building their infrastructures. There is an urgent need to double down in building our structures, as over-reliance on foreign infrastructure can spell doom someday.
In November 2021, the central bank governor, Godwin Emefiele disclosed that the Apex bank would establish an international financial center at the Eko Atlantic city, for investors to invest in critical sectors of the economy, and this will help to position Nigeria as a key destination for investment in Africa. But then, building at home can be filled with uncertainty too as anything in allegiance with the federal government is often faced with misfortune that can hit any time soon. The Apex bank of Nigeria is known for abnormally freezing accounts.