Modupe Gbadeyanka
By Modupe Gbadeyanka
World leader in digital payments, Visa Incorporated, has invested millions of Dollars in leading technology-driven company in Nigeria, Interswitch Limited to raise the valuation of the valuable African FinTech business to $1 billion.
A statement from Interswitch confirmed that Visa is joining its fold as a minority shareholder, with the transactions, expected to close by Q1 2020, subject to relevant regulatory approvals.
There had been reports that Visa invested about $200 million in Interswitch to take 20 percent controlling stake in the Nigerian firm, but Interswitch, which did not confirm this, said the strategic partnership between both organisations will further advance the digital payments ecosystem across Africa.
However, it noted that Visa will join globally renowned investors, Helios Investment Partners, TA Associates and IFC, as shareholders in Interswitch, alongside company management.
The statement said the deal will create an instant acceptance network across Africa to benefit consumers and merchants and facilitate greater connectivity for communities. Both parties will also retain their respective independent solutions, and Interswitch will retain its scheme neutral strategy.
Founder and CEO of Interswitch, Mr Mitchell Elegbe, stated that, “Sub-Saharan Africa is the fastest growing payments market in the world, with growth driven by a young and dynamic population, rapidly evolving consumer behaviour, and an increasing desire for payment solutions that can be accepted across the continent and abroad. I am delighted that Interswitch has formed a partnership with Visa, with whom we plan to drive the next phase of transformation in the African payments landscape.”
On his part, Regional President of CEMEA at Visa, Mr Andrew Torre, said, “Africa is a priority region for us, and we continually seek strategic partnerships with local players to further strengthen our leadership position and enhance the payments ecosystem across the continent.
“This partnership aligns with our global strategy to work with and invest in innovative partners, and we look forward to working with Interswitch to provide new consumer and merchant experiences and support the rapid growth of digital commerce across Africa.”
Co-founder and Managing Partner of Helios, Mr Babatunde Soyoye, noted that, “A strategic investment by Visa, the world’s leader in digital payments, into Interswitch is a substantial endorsement of the Company’s expertise in African payments.
“As an active investor in leading African payments businesses, we see tremendous opportunities to digitise payments across the continent and have worked closely with Interswitch’s management team to build a high quality and scalable platform geared to address some of these opportunities. We look forward to further collaboration with the Company alongside Visa.”
Founded in 2002, Interswitch disrupted the traditional cash-based payments value chain in Nigeria by introducing electronic payments processing and switching services.
Today, Interswitch is a leading player in Nigeria’s developing financial ecosystem with omni-channel capabilities across the payments value chain, processing over 500 million transactions per month in May 2019.
In 2018, electronic payments in Africa accounted for only 12 percent of transactions by volume, compared to 54 per cent in Europe and 79 per cent in North America. Sub-Saharan Africa is the fastest-growing digital payments market in the world, with electronic payment volume expected to grow at a CAGR of approximately 35 percent from 2018 to 2023 in the region (excluding South Africa). This progress is expected to be driven by the deepening payments infrastructure, population and urbanisation growth, GDP growth above the global average, increased mobile and internet penetration, as well as a supportive regulatory landscape for electronic payments and financial inclusion.
Interswitch’s core market, Nigeria, is the largest economy in Africa with a rapidly growing electronic payments market. Point of Sale (POS) and ATM transactions per adult grew at a CAGR of 94 percent and 59 percent from 2013 to 2018, respectively.
In Nigeria, there were only 11 card transactions per adult per annum in 2018 compared to 92 in markets like South Africa, 126 in Brazil and 465 in the UK. Despite this market under-penetration, POS card transactions in Nigeria are expected to grow at a CAGR of 63 percent between 2018 and 2023.
In addition to its switching and processing services, Interswitch owns Verve, the largest domestic debit card scheme in Africa with more than 19 million cards activated on its network as of May 2019.
The business also operates Quickteller, a leading multichannel consumer payments platform, driving financial inclusion across Nigeria with over 270,000 access points, as of 2018, from which consumers can initiate peer-to-peer transfers, bill payments, airtime purchases, and other e-commerce transactions, processing over 42 million transactions monthly as of July 31, 2019 (equivalent to over N560 billion ($1.5 billion) through direct, indirect and Paypoint channels).
Interswitch’s unique market capabilities and strong consumer proposition, has enabled it to deliver consecutive years of sustainable profitable growth.
