Paystack, a Nigerian fintech startup, which recently was acquired by Stripe, is planning to expand its services to South Africa, an indication of further growth since its acquisition seven months ago.
The startup has come from a little beginning to become a notable payment platform in the global stage. In 2018 when Paystack raised $8 million in Series A funding, led by Stripe and others, it was only powering 15% of all online payments in Nigeria. With a customer-base of more than 10,000 businesses on its platform, Paystack’s next line of action was to expand to African countries. It started with Ghana.
Ever since then, the company has seen significant growth, increasing its customer-base in Nigeria to 60,000, powering around 50% of all online payments. The customers which include MTN, SPAR and UPS, use the company’s software to collect payments globally.
Techcrunch reported that the South African launch was preceded by a six-month pilot, which means the project kickstarted a month after Stripe acquired it. And also, Stripe is gearing toward a hotly anticipated IPO, which is fueling its aggressive expansion to other markets.
It is also seen as a reason why the company acquired Paystack as it was seeking a foothold in Africa. Before acquiring Paystack, the company added 17 countries to its platform in 18 months, but none from Africa.
In March, Stripe raised $600 million in additional rounds to expand its services in Europe, putting its valuation at $95 billion.
“The company will use the capital to invest in its European operations, and its Dublin headquarters in particular, support surging demand from enterprise heavyweights across Europe, and expand its Global Payments and Treasury Network,” Stripe said in a statement.
While Europe offers a huge market for Stripe, the fintech boom in Africa presents growth opportunities that the company cannot ignore.
“There is an enormous opportunity. In absolute numbers, Africa may be smaller right now than other regions, but online commerce will grow about 30% every year. And even with wider global declines, online shoppers are growing twice as fast. Stripe thinks on a longer time horizon than others because we are an infrastructure company. We are thinking of what the world will look like in 2040-2050,” CEO Patrick Collison said.
Nigeria, Ghana and now South Africa make up the 42 countries where Stripe is operational, and the company hopes to ride on the back of Paystack to penetrate more markets in Africa.
“South Africa is one of the continent’s most important markets, and our launch here is a significant milestone in our mission to accelerate commerce across Africa,” said Paystack CEO Shola Akinlade of the expansion. “We’re excited to continue building the financial infrastructure that empowers ambitious businesses in Africa, helps them scale and connects them to global markets.”
However, the new market presents Paystack with a new challenge different from what it had to deal with in West Africa, where it worked with different businesses and grow a local team to handle on-the-ground operations during the six-month pilot.
In South Africa, fintech companies like Yoco and DPO, who are already dominating the market, are ready to give Paystack a run for their money. The move into South Africa thus sets the Nigerian startup up for a fierce competition. But the company’s product marketer said the new market is wide enough to accommodate everyone.
“The opportunity for innovation in the South African payment space is far from saturated. Today, for instance, digital payments make up less than half of all transactions in the country,” Abdulrahman Jogbojogbo, product marketer at Paystack said. “So, the presence of competition is not only welcome; it’s encouraged. The more innovative plays there are, the faster it’ll be to realize our goal of having an integrated African market.”
Khadijah Abu, head of product expansion, added that “for many businesses in South Africa, we know that accepting payments online can be cumbersome. Our pilot in South Africa was hyper-focused on removing barriers to entry, eliminating tedious paperwork, providing world-class API documentation to developers, and making it a lot simpler for businesses to accept payments online.”