Introduction
Mercury Bank, a prominent US financial institution that caters to global startups, has announced plans to terminate the accounts of Nigerian startup founders. The closure, set for August 22, 2024, is part of a broader policy affecting numerous countries predominantly from Africa and the Middle East.
Reasons for Account Closures
The bank cited compliance with its partners' regulations as the primary reason for this action. Nigeria has been added to a list of 37 prohibited countries published on Mercury's website. Other African nations affected include Burundi, Cameroon, the Central African Republic, the Democratic Republic of Congo, Mali, Mozambique, Sudan, and Zimbabwe.
Lack of Detailed Explanation
Mercury provided minimal information beyond a brief statement on its website. The message indicated that international founders in prohibited countries are ineligible to maintain accounts, leaving affected parties seeking more clarity.
Response from AltSchool Africa
Akintunde Sultan, co-founder of Nigerian edtech startup AltSchool Africa, expressed frustration over the lack of a detailed explanation. "Mercury closed my accounts too, even with founders living in the US. No proper process or appeal, just carry your money and go if you have ties to Nigeria. The exact policy that caused this isn’t even well explained," he lamented in a post on X.
Notification to Founders
The notification from Mercury to AltSchool Africa read: “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 (the prohibited countries). As a result, we will be closing the Mercury account for AltSchool Africa Inc. on August 22, 2024.”
Challenges for African Startups
Many African startups incorporate in the US to facilitate access to funding. Financial institutions like Mercury have enabled these startups to maintain US bank accounts without being physically present in the country. This arrangement is particularly beneficial for managing investments and operational finances efficiently.
Post-SVB Collapse Scenario
Following the collapse of Silicon Valley Bank (SVB), which previously served as the primary banking partner for many African startups, Mercury emerged as a popular alternative. The latest development forces affected startups to seek new banking solutions, potentially disrupting their financial operations.
Adjusting to New Realities
African startups impacted by Mercury's decision will need to find new banking partners capable of supporting their unique needs. This shift highlights the ongoing challenges and complexities faced by international startups navigating regulatory and compliance landscapes.
