Plans by U.S.-based fintech company, Mercury Bank, to close accounts of businesses linked to founders in Nigeria and some other countries by August 2024, has sparked a scramble for new bank partners.
Mercury’s decision has also caused drawbacks for some Nigerian startups, many of whom rely on the U.S. fintech for their U.S.-dollar denominated transactions.
Mercury offers banking services primarily to startups and small businesses, providing features such as virtual debit cards, cash management, and payment processing.
Akintunde Sultan, co-founder of Nigerian edtech startup Altschool Africa, took to his X page to express frustration with Mercury’s latest decision. He also criticised the lack of transparency and a proper appeals process from Mercury.
According to a message seen by Technology Times, Mercury informed its Nigerian users that, “We regret to inform you that, due to recent changes in how we determine account eligibility, we are no longer able to support accounts for businesses with associated addresses located in these countries.
“We cannot currently open accounts for founders operating in the following countries and regions: Afghanistan, Albania, Bosnia & Herzegovina, Burundi, Cambodia, Cameroon, Central African Rep, Democratic Republic of the Congo, Congo, Croatia, Eritrea, Haiti, Iraq, Lebanon, Liberia, Libya, Mali, Mozambique, Myanmar (Burma), Nicaragua, Nigeria, Pakistan, Palestine (State of), Philippines, Somalia, South Sudan, Sudan, Venezuela, Yemen, Zimbabwe, Belarus, Iran, North Korea, Cuba, Russia, Syrian Arab Republic, Ukraine,” according to information found on the Mercury website.
Some experts believe it may be due to increased scrutiny from regulators. The bank’s partner, Choice Bank, reportedly faced criticism from the Federal Deposit Insurance Corporation (FDIC) earlier this year regarding its compliance procedures, particularly for accounts opened by foreign companies.
Another factor could be the Financial Action Task Force (FATF) Greylist. Nigeria, along with several other affected countries, has been on this list since February 2023. The Greylist identifies nations with deficiencies in anti-money laundering and counter-terrorism financing regulations.
Analysts say that the closure of Mercury accounts is a significant blow to Nigerian startups. Many of these companies rely on U.S. dollar funding from international investors. Having a US bank account simplifies managing these funds and conducting international transactions.
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