Mercury, a digital bank based in San Francisco and a preferred banking partner for many African startups, announced it would close the accounts of users in thirteen African countries by August 22, 2024. The move comes in response to recent changes in account eligibility criteria, affecting users in a total of 37 countries.
Impact on African Startups
Mercury has been a vital banking service for African startups, especially those incorporated in Delaware but operating primarily in Africa. However, with the new restrictions, these startups can no longer maintain Mercury accounts unless the founders reside in the United States.
According to emails seen by TechCabal, Mercury cited changes in eligibility determinations as the reason for the new prohibitions. Additionally, some of the affected countries have been on the Financial Action Task Force (FATF) Greylist since 2023, which subjects them to increased scrutiny due to deficiencies in money laundering and terrorism financing regulations.
Countries Affected
The African countries affected by the new restrictions include:
- Burundi
- Cameroon
- Central African Republic
- Democratic Republic of Congo
- Republic of Congo
- Liberia
- Mali
- Mozambique
- Nigeria
- Somalia
- South Sudan
- Sudan
- Zimbabwe
Previous and Ongoing Challenges
In December 2023, one of Mercury’s banking-as-a-service providers, Choice, overhauled its KYC process due to concerns about lax user onboarding and potential breaches of money laundering or terrorism financing laws. This change added further complexity to Mercury’s operations.
Tomiwa Aladekomo, a media tech startup founder using Mercury, highlighted previous issues, noting, “About 18 months ago, one of Mercury’s partner banks limited transfers to a ton of countries (including Nigeria) to a $10k limit. So if you wanted to send $300k to Nigeria, you’d have had to do 30 transfers, which would be flagged.”
In 2022, Mercury restricted the accounts of several tech startups, including those backed by notable American accelerator Y Combinator, citing “unusual activity.”
Alternatives for Affected Startups
With the impending closure of Mercury accounts, affected startups will need to seek alternative banking solutions. Potential alternatives include Brex, Ramp, Wise, and fintechs like Leatherback, Raenest, and Graph.
Conclusion
Mercury’s decision to close accounts in 13 African countries underscores the ongoing challenges fintech companies face in navigating regulatory landscapes. Startups in these regions must now pivot quickly to find alternative banking solutions to continue their operations smoothly.
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