M&A deal of the month: Network International acquires DPO Group

M&A deal of the month: Network International acquires DPO Group

Volker Schloenvoigt
October 1, 2020
The acquisition of DPO Group reflects how serious Network International is about expanding its footprint in Africa

M-pesa, the mobile payments business founded in Kenya, has been the poster child for African payments for many years but they are not alone. There are many payment companies that have emerged over the course of the last few years and this is being reflected by a rise in investments over the last 18 months. Just consider Visa’s investments in Interswitch and Flutterwave, two businesses in Nigeria.

Africa is witnessing a fast-growing banking sector driven by increased banking penetration, expansion of branch and ATM networks, and improved economic conditions. Africa’s overall banking market is the second-fastest-growing and second-most profitable of any global region, with a lot of innovation in the financial services landscape. The continent is in the midst of an acceleration that is lifting large elements of the population out of poverty, creating an emerging consumer class, and propelling rapid economic growth in many economies with increasing financial services needs. Over the last five years, Africa’s banking population grew from 130 million in 2012 to well over 300 million in 2018 according to World Bank data. Despite this rapid change to date, there are still significant future growth opportunities, for example, according to World Bank, Africa’s retail banking penetration stood at only 35% of the adult population in 2018, which is roughly half of the global average. As the overall banked population increases, the level of non-cash payments is expected to rise alongside it, given increasing access to bank accounts and non-cash payments methods. Whilst bank account penetration has grown, the number of mobile money accounts in the region has grown even faster. The need for digital, non-cash payments is there. COVID-19 is accelerating this trend just like in any other region globally. According to a recent Africa survey, over 30% of consumers said they were increasing their usage of online and mobile banking tools during the pandemic, and e-commerce adoption by SMEs in South Africa is expected to double, reaching 45 - 55% by 2025. But in order to encourage financial inclusion and increased level of digitisation, infrastructure needs to be available.

DPO Group is one of those players that is actively pursuing the digital payments space in Africa whilst not being that well-known outside the region. It has its origins in Kenya way back in 2006 but has transformed into a Pan-African Payment Service Provider that serves over 100,000 merchants across 20 African markets. As a PSP, it provides payment acceptance for cards, e-wallets, and mobile money to its merchant customers and this is being enhanced by an end-to-end risk and fraud management solution. It is now processing $2bn worth in payments and the company now counts global blue-chip brands such as Uber, DHL, KFC, Expedia, and Booking.com as clients. A good example of how DPO is catering to the specifics of the African market is its DumaCard, a virtual card solution that does not require a consumer to hold a bank account but can be loaded via mobile money solutions instead, thereby providing a proposition to consumers wanting to use e-commerce but not having a bank account (yet). The card can be used for cross-border transactions.

In August 2020, Network International, arguably the largest payment player in the Middle East with some footprint in Africa, announced the acquisition of DPO for a reported $288m. Network International acts as issuing and acquirer processing, as well as being a merchant acquirer with omnichannel propositions. It listed on the London stock exchange in 2019 and part of the growth story was the opportunity about tapping into the potential for payments players in Africa. This acquisition is a reflection of this growth strategy and it would not come as a huge surprise if it was followed by others.

The content of this article does not reflect the official opinion of Edgar, Dunn & Company. The information and views expressed in this publication belong solely to the author(s).

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