HN Explorer

Launch HN: Lemonade Finance (YC S21) – Digital Bank for the African Diaspora

98 points by ridwan_olalere1 ↗ HN
Hello Hacker News! Rian and I are co-founders of Lemonade Finance (https://lemonade.finance). Lemonade is a digital bank for the African diaspora. There are over 20M African immigrants in North America and Europe and many are running some form of business back home. We provide multi-currency accounts to help them manage their unique banking needs.

Rian and I have worked together over the last several years helping to build African fintechs such as Opay (in Nigeria) and Okash (in Kenya). As directors of operations and finance, we were instrumental in scaling Opay from $0 to $2B monthly transactions.

It stood out to us that Africans can pay up to 30% more than the global average to move money abroad, and most African countries are only enabled to receive, and unable to send. Looking further, we discovered that remittance (sending money back home) wasn't enough for the diaspora—a lot of them run one or two businesses back home. There's limited access to African currencies abroad, it's difficult to open and maintain accounts back home, getting money out of Africa is a challenge, and the size and frequency of their transactions is much greater.

We issue bank accounts to our users in both their country/currency of origin as well as in their country/currency of residence, and provide them with the tools to manage both their personal and business banking between continents. We integrate and build open banking APIs in the countries we operate, manage floats across countries, and obtain the licensing that enables our users to store or move money across borders.

8 of the 10 fastest growing international migrant populations are African. The African diaspora represents a $10B market opportunity. We launched 10 months ago and are currently processing $5.5M per month and made $23k in monthly revenue in July. We are licensed to provide our services in the US, Canada, and the UK.

We are really happy we get to share this with the Hacker news community. Please let us know your thoughts and questions in the comment section below.

70 comments

[ 4.6 ms ] story [ 159 ms ] thread
kle
> the majority are running some form of business back home

majority, as in >50%? is this really true?

I'd love to know more. What are these businesses and are people using them to finance their living in NA/Europe?

riancochran
There’s a convergence of consumer and business here. Even a home owned and leased out in a country of origin drives demand for services that aren’t offered by today’s financial institutions. Also, as you suggest, many immigrants export cars and other physical products home to subsidize their salary where they now reside.
ComodoHacker
People are using them to provide a decent living for their families and relatives in their home country.

A year or half of savings is often enough to start a business in a poor country.

Just have heard a story today of a truck driver in US who helped his relatives open and run two medical clinics in his hometown (not Africa).

dang
I've replaced "majority" with "many" in the text above, since that's just as good for making the key point. If someone comes with a compelling citation we can change it back :)

(Your comment is great, I just needed a place to hang this moderation announcement!)

drewpc
Wow, this is fantastic--congratulations! Are you able to make money transfers free for the account owners?

This problem set reminds me that The Philippines has a similar problem with their "Overseas Foreign Worker" population (estimated at 2.2M people) that works overseas, primarily in the Middle East, in order to send money back home.

riancochran
Yes. Certainly a challenge for most immigrant communities. Plenty of opportunity outside of the African diaspora
usgroup
That the majority of a 20 million strong diaspora are running a business is pretty surprising if it is true.

Wonder what the consequences would be if spread(BTCNGN) < spread(USDNGN), where NGN is the Nigerian Naira as an example.

lifty
Bitcoin is already used as a payment rails from USD -> BTC (lightning) -> NGN, using Strike wallet and Bitnob. But I don't know how much the spread is.

Edit: correction, "already used" is too strong. This is a very new feature on Bitnob's side.

[deleted]
(comment deleted)
mint2
Have you thought about name conflicts with lemonade insurance? Both you and them are financial products? Do you have prior claim in the US and can go after them? If not, then you may want to look into any potential issues there early rather than later.
riancochran
Considered. Certainly something to keep an eye on but we are still miles apart with our offerings.
mint2
Good to hear. I’m not an expert on the topic, but seeing what some companies lawyers do like backcountry.com made me a bit concerned for you. backcountry.com was really without merit, just more lawyers. Backcountry.com even went after coffee shops with the word, a totally unrelated area.
[deleted]
(comment deleted)
haasted
How do you handle KYC and AML?
riancochran
We have a partner that we use for verification, AML, sanction, PEP checks during onboarding.
unixhero
How do you support crypto currencies?
riancochran
None yet. But we’d like to support it eventually. We need to be careful navigating the regulation there.
t3rse
Maybe it could be a separate platform to insulate the risk... but I'd love to see a startup go all in on crypto remittances. Speaking as a Ugandan who has to send money back to Kampala 30-40 times per year.
Geee
There's Strike: https://strike.me

And of course anyone can use just standard Bitcoin & Lightning Network, no startups needed.

idworks1
Is there a place where we can find the list of supported countries? If this supports Guinea and Senegal, you got yourself a customer.
riancochran
We only onboard users in Canada today. But we are finalizing integrations to launch in the US and UK. We support the Nigerian communities first with Kenya coming next.
Yenrabbit
> You can send money to Nigeria, Ghana & Kenya

Do you have a plan for which countries you'll support next? And any you think will never be supported?

slownews45
Some african countries don't really have proper currency freedom. I know in Zimbabwae they have currency auctions, but there remains a large spread between these supposedly market based auctions and black market rates. Not sure how South Africa handles wiring large amounts out of the country - sometimes things need central bank approval etc.

Anyways, an interesting space and if it solves pain points then even better - you'll have a success on your hands (not everyone wants to work with these govt agencies directly).

nsomaru
South Africa up to R1m per annum is your no questions asked single discretionary allowance (SDA).

For up to R10m per annum you need to apply to the reserve bank.

Anything more is extremely difficult, and that makes me think that is why there is almost always a premium on BTC on local exchanges.

Makes you wonder how corrupt people got their money out (billions) though.

slownews45
For folks following along, this is $68K USD in terms of SDA.

These are some of the SUREST ways to make money (if you are connected). If you can get a currency allocation not available to others, you have a license to print money or if you can get loans / access to capital in a devaluing currency situation (ie, the folks getting the big loans in venezueala etc often very connected, paying back pennies on dollar).

My impression is that folks with FC needs - you run a business outside of country that handles the foreign currency piece, then try to just remit in only what is needed. Zimbabwae has the same thing (you can also partner / barter with someone so that their inbound FCA covers your outbound FCA needs so that nothing gets in where it gets stuck or gets what are called preferential allocations. )

Afeez
Fantastic product to founder market fit. OPay is now worth a staggering 2 billion dollars with over 3 billion dollars in monthly payment value. For a 3 years old startup, thats a great fit! For so long incumbent startups and banks have refused to cater to the needs of Africans in the diaspora. Would be fantastic if the current product can evolve to an actual digital bank. Godspeed team.
atlasunshrugged
This is super cool but can you help a newb understand why I couldn't use a Revolut or something like that which lets me hold a basket of different currencies? Or send money back and forth with Transferwise?
riancochran
Hi. Good question. Revolut, Wise, etc, doesn't support native african currencies, nor do they support the flow of funds from Africa to NA or Europe.
pcueb
Wise supports KES
7b64f0f2
Nice ! What are your plans for supporting other currencies ? Specifically Europe Union and Maghreb countries
riancochran
We will support EUR and GBP soon. They are already and option as a sending currency. But they will also become available as an account currency soon.
init
Congratulations from a fellow African! Looking forward to your success!

Moving to the US and Europe was a shock for me. It is hard to send money to my home country. If a relative back home needs money within two weeks I usually have to ask other people to send money on my behalf or I have to ask other relatives back home to help them until I can pay them back. This is constant source of stress when you have a poor family.

I ended up quitting my job in another domain to go work in Fintech with the ultimate goal of solving this problem.

Some issue that make it hard for me to send money:

* Transfer fees are very high for both bank transfer and remittance services.

* The large remittance services like Western Union and MoneyGram have draconian processes to the point that they can just block your transfer with no clear explanation and on multiple occasions they even blocked all customers from sending money to my country.

* Only one bank back home has online banking services and they have lamentable security practices.

* Many banks in the west don't let me send money back home. If they do then they require you to physically go to a branch and prove your identity. This was/is a problem during the pandemic.

* You can only send up to a certain amount. Too little, it gets eaten away by the transfer fees, too high, they don't let you send it unless you give them a sob story and they feel sorry for you and approve it just this one time.

riancochran
We can relate. All of this is solvable.
beebeepka
Do you feel comfortable sharing as to why these problems exist in the first place?
herval
Why is it that way today?

I can imagine Western Union and the like would certainly love to move more money, as they're paid per transaction - what makes it so that they don't make it easier?

riancochran
what are some of your other pain points?
init
These are my biggest pain points and your solution is similar to what I had in mind but more geared towards the lesser served markets: Portuguese and French speaking countries.
SOLAR_FIELDS
Curious why a solution such as Wise (formerly TransferWise) doesn't solve the transfer fee problem. Are certain countries in Africa not supported?

Not affiliated with Wise, by the way, simply a satisfied user (but I've only used it for USA <-> European transfers).

riancochran
We offer more than just sending. Wise actually charges fees too, that make lower transfer values more expensive. But beyond transfers, Wise doesn't allow it's users to hold NGN, KES, GHS, for example, nor do they allow users to send from Africa into NA/EUROPE.
init
I've never used Wise because it doesn't serve my country. In fact there's no shortage of remittance services besides Wise.

The main problem is that the KYC and risk checks run by european and american companies don't take into account how people relate to each other in Africa and how money flows in the continent. It's possible that one person regularly sends money to several relatives with different names and in different cities in the span of a few weeks. Fraud detectors at the european/american remittance companies don't like that.

Many of us are also living abroad temporarily and want to retire in our home countries. We want to repatriate most the money we earn abroad but banks in the west don't make it easy.

pk455
How does this compare to SendWave?

Also, what's your strategy around combating fraud?

riancochran
1) Sendwave only provides remittance into Africa (among other continents), but you can't bring funds out of Africa via Sendwave. 2) That's all Sendwave does, just that one service. 3) We offer user's accounts in their country of origin (KES for a Kenyan), plus an account in their country of residence (USD if now residing in the US). Then we allow for instant interaction between the two (so users can send money out of Africa), as well as other services, plus other services to come.
riancochran
Users will also eventually have the freedom to hold the currencies they want rather than just two as described above.
temitope23
Fire product, I used it to send money to the uk and Nigeria. It’s really fast. Good job guys
Hidayyah
It's awesome! I came across Lemonade finance few months ago and their service has been satisfactory. Great job guys!
mattfrommars
Great stuff! I've been watching fintech and its really pulling my interest in. Fintech are on the rise

https://news.crunchbase.com/news/europe-fintech-unicorn-star...

I have tons of questions to ask but no sure the best medium. Like, how does one start a remittance startup from scratch as a software developer? My knowledge is limited to stock and trading in financial space. Should I pursue CFA to get a idea of remittance industry and get my share ?

Or, say you are from Panama and want to start a mobile banking startup - a clone of Alipay - transaction via QR codes only, how do you get up to speed with it?

riancochran
I'd advise you begin by understanding the regulation in the markets you want to service. If this is just Panama, and you want to begin with domestic interactions, then understand what license, if any, you need in order to process payments or hold funds on behalf of your users.
mattfrommars
Would it be OK to ask you to drop contact info best way to reach out to you? Email perhaps?
missedthecue
Why did you call it Lemonade?
[deleted]
(comment deleted)
shinryuu
Probably because when life gives you lemons you make lemonade. Being born in Africa is in many ways getting a lemon in life if you generalise.
[dead] nnash
The African Diaspora refers to the descendants of slaves taken to the New World and elsewhere not first generation immigrants who left by choice. I'd suggest revising your value prop to stop coopting language meant for different peoples.
flyinglizard
Common definition of "diaspora" is "people living outside their place of origin". Not sure why you'd suggest it does not apply to first generation immigrants.
wizwit999
This seems good, but an uncomfortable truth is that many diasporans (especially working class) are often tax averse to put it politely, meaning they dont want to report their assets especially the money they send back home (which is part of why they send it back home). I assume with a solution like this, e.g. for people living in the US, you'd be mandated to collect SSN and report assets. That would increase their reported wealth in the US.
ceejayoz
Assets? Or income?
wizwit999
I'm speaking assets here. Income is a separate issue. E.g. if you send money with a remittance app, that might be tracked to your income but it's not part of your assets since no one (in the US) knows what went on with the money on the other end. This affects stuff like eligibility for Medicaid etc.
devoutsalsa
May you suggest you focus super hard on customer support? The support I’ve gotten from mobile finance (Simple, Chime, Revolut, Acorns) has been at best underwhelming. I’ve mostly stopped using these kinds of services because I don’t trust them to handle things well if I ever have a problem.

Good luck! It looks like a super cool idea.

riancochran
Yes. In what situation has support been bad for you?
devoutsalsa
Everything. Slow email support. Different customer service rep every iteration. Replacing debit card. Debugging declined transactions with sufficient money. All of it.
ritaefe
I find your mission super important. Processing $5.5M per month in less than a year since you started is impressive.
echopurity
>Africans can pay up to 30% more than the global average to move money abroad

What gives Africans this amazing ability?

pastrybanking
Okash is a payday lender with a notorious reputation for unethical business practices in Kenya [1][2]. With respect to this particular product it would be good to know what ethical standards and legal regulations are followed in the countries you operate in.

[1] Borrow from Opesa and Okash at your own risk-DLAK - https://www.capitalfm.co.ke/business/2020/06/borrow-from-ope...

[2] Chinese billionaire behind Kenya’s popular mobile money lending apps - https://nation.africa/kenya/news/chinese-billionaire-behind-...