A payment method that is convenient for customers is made available to small and medium-sized businesses in Nigeria by Flex Finance.
Startups must be careful due to tighter funding cycles, offering opportunity for expenditure management software. Whoever can do this has a tremendous market.
Startups face it too. Many African companies manually repay personnel or vendors. Managing business spending adds time and manual mistake costs to established companies and startups. These payment requests are hard to track for finance departments.
The World Bank estimates African micro-retailers’ business payment transactions at $1.5 trillion each year. This compares favourably to African households’ consumption.
African final household consumption expenditure was 1.93 trillion in 2021 (Statista). It’s a little over $400 billion—not a tiny difference. But just 22.2% more than firms spend annually.
McKinsey numbers for overall corporate and consumer spending change the story. African business spending overtook consumer spending in 2015.
McKinsey reported that African enterprises spent $2.6 trillion and consumers $2.1 trillion. McKinsey consultants said Nigeria and South Africa dominated business spending. Despite differences in numbers, African businesses spend hundreds of billions annually and make these large payments with primarily manual approval processes. The think-tank Brookings predicts $4.2 trillion in industry spending by 2030.
Fintechs have traditionally concentrated on digitising consumer payments notwithstanding business expenditure. Consumer payment fintechs have funded hundreds of millions of dollars annually since 2019 to digitise payments. B2B fintechs are newer.
That may change. London-based investment advice DAI Magister claims investors are shifting from consumer payment fintechs to “B2B payment solutions incorporating the CFO tech stack.” Digitising B2B payments, particularly how sellers collect or pay other businesses, has spawned some fintech enterprises.
Flex Finance is different from this B2B payments group since it gives operations and finance divisions of firms seamless but tighter control over their spending.
Finance controllers can pre-approve spending restrictions and speed up vendor payment and reconciliation with the company’s web- and mobile-based technologies.
Flex Finance claims their software can save businesses 40% on payment processing expenses and losses.
Read also: Flutterwave launches ‘tuition’ payments in local currency for Nigerians in Diasporas
The venture funding shortage benefit
Saving money has value. Startups are more cost-conscious as funding becomes scarcer. Startups can’t waste business cash because investors are tougher to convince and require accountability. Everything matters.
Flex Finance serves more than startups. Ntel, a midsized internet provider, the National Open University of Nigeria, and Shola Akinlade’s Sporting Lagos are among its 2,500 subscribers.
Flex Finance excludes micro-businesses. Nigeria’s several dozen million MSMEs process millions of microtransactions every day, but they’re harder and more expensive to serve. They are too casual for Flex Finance, which targets manual back offices of established businesses.
Flex Finance offers business workers virtual and physical corporate cards with pre-approved spending limitations. Finance departments may plan better and reduce the shock of unexpected invoices by connecting spending to easily trackable activities and people.
Transactions under 200 million cost 0.1%. Transactions over 200 million (approximately $252,000) are negotiated.
Tunisian-founded Expensya, a spend management system, is a top European accounting office software vendor. Medius, a renowned Stockholm-based company spending management solution, purchased it. Flex Finance can fill the expenditure management gap in Africa, where Expensya’s founders are from.
Flex Finance is now only in Nigeria. However, it could disclose the continental corporate expenditure management opportunity. Fortune Business Insights estimated the 2022 business expenditure management software market at $19.07 billion. Africa has received little attention, therefore statistics are few.
Crunchbase data indicates Flex Finance has raised at least $800,000 since its 2019 launch. Accion Venture Lab, MasterCard Foundation, and Catalyst Fund contributed $200,000 undiluted. LoftyInc Capital Management, Berrywood Capital, and Gumroad CEO Sahil Lavingia invested.
Flex Finance founder and CEO Yemi Olulana says his company is not in a rush to raise financing.
Tracking everything
Strava, a physical activity monitoring app, gained popularity in the years preceding up to 2020 due to its interoperable, “uncluttered,” “for adults” design. The app increased 179% between January and May 2020, reaching 100 million users in 195 countries by 2022.
Strava’s popularity and growth have depended on its clear and deep analysis and powerful social network of amateurs, professional athletes, and common people who prefer to show off physical activity.
Flex Finance, like Strava, appears to be betting on better analytics and company spending insight. This should help money managers distribute capital better. Olulana claims his organisation has helped customers restructure vendor payments after learning they were overpaying. Olulana’s team hopes these and pre-loaded debit cards will spread and win over African finance teams.
Flex Finance has no social layer yet, unlike Strave and likely never. Finance nerds’ social network will be more boring than Meta’s Twitter equivalent. However, satisfied accountants and CFOs can boost growth through word-of-mouth. As mentioned, the winner gets dinner.