Micro, small, and medium-sized firms (MSMEs) constitute the backbone of the Nigerian economy, accounting for more than 60% of GDP growth and playing a crucial role in job creation. According to the National Bureau of Statistics, there are over 39 million such firms, and 87% operate informally, meaning they primarily receive cash and perform activities on paper.

As a result, many small merchants struggle to develop and capitalize on economies of scale by gaining access to an ecosystem of digital tools and financial services (credit, savings, business tools, and payment solutions). While some SMEs are unwilling to attempt financial products, accessing banking solutions from big financial institutions is not easy.

This is where startups come into play. Thousands more businesses have gone digital in the last five years, opening bank accounts and accepting payments via point-of-sale terminals from some of these upstarts, including Traction, the Nigeria-based merchant solution platform that today announced a $6 million seed round. The investment was anchored by Pan-African investor Ventures Platform and Multiply Partners, with participation from P1 Ventures and other investors.Traction, founded in 2020 by Mayowa Alli and Dolapo Adejuyigbe, is a fintech that allows small companies to receive payments, manage accounts, and access operational tools. In an interview with TechCrunch, the founders, both ex-McKinsey consultants, discussed how their prior work, which included devising financial inclusion initiatives in Nigeria, highlighted the plight of small and medium businesses across the West African country.

Co-CEO Adejuyigbe, on the call, contended that banks lacked a comprehensive understanding of SMEs’ activities and provided inadequate financial services. Consequently, he and Alli set out to create 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. That end-to-end digitization looks like this: starting with point-of-sale software (to record sales, handle inventory, and manage customers) and POS terminals and virtual accounts (to take payments), then progressing to offer other services such as merchant wallets, cash advance loans, savings, and bill payments.