Traction, a fintech that allows small businesses to collect payments, manage accounts, and access operational tools, was founded by former McKinsey consultants Mayowa Alli and Dolapo Adejuyigbe.
Traction was inspired by the duo’s stint at McKinsey, which includes developing financial inclusion programs in Nigeria. According to Tech Crunch, their work in Nigeria exposed them to the issues of small and medium-sized enterprises throughout the West African country.
Small companies are the backbone of the Nigerian economy. According to TechCrunch, small firms account for 60% of GDP and provide jobs. Over 80% of the estimated 39 million SMEs operate in the informal sector, where access to credit is usually challenging.
This means that a huge number of SMEs in Nigeria lack the ability to grow by gaining access to digital tools and financial services such as credit, savings, business, and payment solutions. They also have difficulty obtaining banking solutions from large financial organizations.
According to co-founder Adejuyigbe, banks lack a complete understanding of SME activities and deliver unsatisfactory financial services. As a result, he and Ali made the decision to build a “bank-agnostic platform that would enable an end-to-end sales payment cycle as well as access to additional services to assist these firms in growing.”
Traction, according to Alli and Adejuyigbe, is a timely intervention to address the financial needs of SMEs in Nigeria and West Africa as a whole.
“That has been our thesis from day one. It was like an organic product journey built from what we had understood, interviewing and meeting prospective SMEs or customers,” said the fintech’s co-chief. “What that affirmed was essentially like an offline merchant acquiring model that we’ve also seen in the U.S. with Square, in Latin America with StoneCo, in Europe with SumUp and BharatPe in India. It’s a clear playbook that has guided what we’ve built to date.”
Traction services two types of merchants: traditional and premium, from industries such as food and restaurants, FMCG and supermarket chains, fashion, beauty, and lifestyle businesses, electronics outlets, and healthcare facilities.
The first group, which comprises street food vendors and small local convenience stores, accounts for 75% of the platform’s user base. The second group consists of more formal merchants who have left banks for Traction. In effect, Traction allows businesses to not only accept payments and manage accounts, but also obtain access to a variety of capabilities like as a comprehensive retail POS system, E-commerce, and invoicing. Simultaneously, the financial platform assists small firms in obtaining financing to continue operating.
According to Tech Crunch, Traction, which has been in operation for three years, had a 7x growth in income and an 8x increase in transactions last year while serving over 70,000 businesses across Nigeria. It has also made loans totaling over N2 billion ($2 million).
Meanwhile, Traction just launched a $6 million seed round led by Pan-African investor Ventures Platform and Multiply Partners, with P1 Ventures and other investors participating.
