1 week Ago By Andrew Samu
In 2019 Khalid Talukder and Dominic Duru started thinking about creating DKK. By 2022 the company’s revenues topped £63 million and the emerging markets foreign exchange liquidity provider announced a major global expansion. It’s not unheard of for fintech startups to be valued in the tens of millions today.
But having a fintech startup turnover of more than £60 million in its third year is extremely rare—probably rarer than finding a unicorn . Dominic and Khalid didn’t hang around. A few weeks after they started thinking about DKK Partners, they got it up and running.
The date was January 13, 2020. The focus was on emerging markets liquidity, particularly in Africa. Khalid had worked at Deutsche Bank and UBS, where he oversaw electronic FX in emerging markets.
Following the financial crisis, the LIBOR scandals, and a low- inflation environment, many banks ‘de-risked.’ Emerging markets were affected more than most. The cost-benefit analysis for banks just didn’t add up.
How Emerging Markets Lost Out After the Global Financial Crisis “Once you take away credit from a client, it’s very hard to make any money,” Khalid explained. The exit of banking services from emerging markets left a massive vacuum of opportunity for both local banks and corporates. Khalid left banking to work in the fintech space, originally with Ebury and then with IFX Payments, among others.
At these companies, he saw the changing landscape that emerging markets had to navigate. Initially, the newly formed DKK Partners worked closely with Currencycloud. The open banking API and multi-currency platform, Currencycloud, helped DKK Partners by adding the firm to its payment institution licenses.
This support meant that DKK could hit the ground running. Acting as a trading floor, DKK Partners needed bank accounts to both buy and sell currencies. What was the Impetus Behind the Rapid Growth of DKK Partners? Challenges around the need to use correspondent banking were one of the things that Khalid and Dominic noticed.
This correspondent banking service emerged to simplify an extremely bureaucratic process: the opening of a bank headquarters in another country. The concept works as follows: Bank A, based in Tel Aviv, has no presence in New York. However, their clients demand bank services in New York.
Therefore, Bank B, based in New York, offers itself as a correspondent bank to provide the most diversified services, such as cash management services, international wire transfers, and cheque clearing. In general, few correspondent banks provide services to a lot of respondent banks. “The opportunity we saw, and the opportunity we came across as we started going into emerging markets, was immense,” Khalid said.
“The problem that we started to encounter was around currency clearing. Especially dollars.” A lot of emerging market banks must go through a corresponding banking network.
Although this problem has always existed, Khalid and Dominic hadn’t been aware of just how bad it was. If you work at a smaller regional bank, you are often part of a chain where multiple banks are involved in lending money. This affects the settlement of invoices by companies importing services.
DKK Partners is not a digital assets-focused business. However, the advent of digital assets, especially USDT and USDC, had a profound impact on what Khalid and Dominic did next. The two partners saw two parallel streams going on: the classic FX market and the digital assets market.
Usually, when you do a trade, you do it with one counterparty. However, if you had three counterparties instead—one giving local currency, the other giving digital currency—then DKK Partners can take the digital currency and get hard currency. Nobody had tried this before.
This new approach meant that DKK Partners could omit the corresponding banking network. Instead, with the use of digital currency, both the cost and the speed of gaining currency were optimized. Instead of seven to ten days, local importers in Africa could get access to the money they needed to pay invoices in only two days.
“We realized that we weren’t actually selling FX,” Khalid explained. “We were selling time and time savings through the way we were pivoting across different markets to satisfy a real need.” The importer is happy.
He has his dollars. The supplier is happy. They are getting paid on time.
Additionally, the order book starts to grow. After testing the new service with a company in Senegal, the way word of mouth works in emerging markets meant that the service DKK Partners had conceived went viral. The Next Stage of Growth at DKK Partners Once the fundamentals of the business vision were established, Khalid and Dominic needed to scale.
They needed to hire a trader, a compliance person, marketing, and more. They also needed to grow a local presence in emerging markets. This was necessary to foster trust among companies needing FX solutions.
One of the initiatives that helped strengthen trust with local banks and companies was a partnership with Deloitte. Next steps included enlisting the support of Bovill as a global compliance partner. In 2023, the revenues of DKK Partners exceeded £100 million.
New offices had been opened in Ghana, Dubai, Cameroon, and Ivory Coast. India and Spain are some of the markets that have since seen DKK Partners offices open. Additionally, earlier in 2024, DKK Partners secured initial approval from the Virtual Assets Regulatory Authority of Dubai.
The company has also joined forces with a company of the royal family of Dubai. And in July this year, Meridien acquired a 27% stake in DKK Partners, meaning that more growth is on the horizon. Follow the most exciting fintechs from across the world.
Register as a subscriber with #DisruptionBanking today here . Author: Andy Samu #FX #DigitalCurrency #CorrespondentBanking #Payments #EmergingMarkets #Risk #Liquidity See Also: Reimagine Corresponding Banking Services – The Future is Now | Disruption Banking DKK Partners reaches £100m in revenue ahead of major expansion plans | Disruption Banking DKK Partners announces global expansion as revenues top £63m | Disruption Banking.
