Stripe has doubled-down on its investment in Paystack, one of the leading payment technology companies in Africa. The acquisition is further proof of the growth potential for electronic payments across Africa
It is only four weeks ago when we talked in our newsletter about Network International’s investment in Africa that we highlighted the considerable growth potential for electronic payments in Africa. And just to confirm what we stated at the time, this month saw the acquisition of Nigeria-based Paystack by Stripe in a deal alleged to be worth more than $200m. The new deal is the culmination of Stripe’s involvement with Paystack, having led (together with Visa and Tencent) an $8m Series A funding round in mid-2018.
Paystack is an interesting technology business that provides payment acceptance solutions to merchants for online commerce. It does so via an API and ‘a few lines of code’. It has shown remarkable growth over the last few years, serves over 60,000 merchants mainly in Nigeria and Ghana, and claims to process 50% of all online transactions in Nigeria. Importantly, it supports card payments, mobile as well as bank transfers which are important e-commerce payment methods in the region. To date, it has been entirely focused on online commerce but according to its own website, an offline POS solution is in the planning. It is an obvious statement to make that having a reliable payment solution is critical for the success of e-commerce but this might be even more so in Africa, where e-commerce is still at a more nascent stage, partly due to logistical challenges. Earlier this year, Quartz Africa provided some interesting data on the average annual spend per customer in 2019. Most of the sub-Saharan African countries (except South Africa) for which there was reliable data, ended up in the bottom quartile with an average spend per customer per year in the range of $40-60, compared to a global average of $500. In other words, there is plenty of room for growth.
Undoubtedly, Stripe had these growth projections in mind, and having been engaged with Paystack over the last few years, it was arguably a safe bet to complete the acquisition. It is an easy way to accelerate its presence in the region. For the time being, Paystack is expected to continue operating as a separate entity but in the long run, it has to be assumed that it will become embedded in Stripe’s GPTN, its in-house built platform for global money movement. To quote John Collinson, President and Co-Founder of Stripe: “We’re investing now to build the infrastructure that’ll power internet commerce in 2030 and beyond. If we get it right, we can help the internet fulfil its potential as an engine for global economic progress.”Paystack will support this ambition. At the time of the 2018 Series A announcement, Paystack stated that it wanted to become the 'Stripe of Africa'. It’s funny how some things work out …
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