Stax, a platform that manufactures automated USSD codes to help Africans buy airtime, send and receive money, and transfer money between accounts, has raised $2.2 million in a seed round.
Anthemis Group, Orange DAO, 500 Startups, Garuda Ventures, and GAN Ventures were among the investors in the round, which was co-led by World Within Ventures and Noemis Ventures, both based in the United States.
In a market where internet-enabled app-based banking can reach 300 million subscribers on the continent, USSD technology, which is mostly utilized by feature phones and is primarily used offline, outperforms it with 850 million connections.
This technology allows users to send and receive money, pay bills, and buy data without having to go online, and reports claim that it handles more than 90% of digital transactions in Sub-Saharan Africa.
This mass market is dominated by telecommunications companies and banks, which provide the technological infrastructure that enables these code-based transactions.
Users often dial a service code, such as GTBank’s *737#, then follow a prompt asking if they want to send or receive money, pay bills, or check their account balance, among other things, and the telco or bank responds.
However, USSD has its own set of difficulties. Consider Nigeria, where the average banking user has three to five accounts, and while some customers utilize bank apps or fintech platforms to conduct online transactions, others rely on USSD numbers. For the latter, remembering one or two codes is one thing; cramming about five is another.
Then there’s Stax. Ben Lyon, Jess Shorland, and David Kutalek founded the firm, which gathers all of these numbers from numerous accounts into an app that customers can access offline, allowing them to perform transactions without dialing any USSD codes. Stax’s goal here is to improve the user experience.
Stax describes itself as a distributed team, with employees based in the United States, the United Kingdom, Nigeria, and Kenya. Its platform is operational in ten African markets, but it only fully serves six — Kenya, Uganda, Tanzania, Nigeria, Ghana, and Ethiopia — where consumers may access more than 100 banks and mobile money accounts.
Last May, the platform was released from beta. In its initial month, it had fewer than 3,000 monthly active users, but it has since expanded to over 170,000 customers, with just 40,000 of them being active monthly users.
While USSD is hailed for its ease-of-use and offline features, experts have highlighted over the years that improper validation in the technology can lead to attacks from hackers with a propensity to leak sensitive information.
Stax intends to introduce various features along the way, including a self-custody crypto wallet that will start with USDC, allowing customers to purchase airtime while dialing non-financial codes. When Stax’s Series A round closes, the seed extension will allow it to further develop these capabilities and expand its services from 10 to 50 African countries.