The success of the African Continental Free Trade Area (AfCFTA) will largely depend on a seamless payment system between member countries and Nigeria is well ahead of its peers in the race. Three of its gateway companies, Interswitch, Paystack, and Flutterwave now hold the record of hauling in the most investments on the continent.
On Wednesday, Flutterwave, a payment gateway based in Nigeria announced it has raised a Series C round of $170 million to improve its technology, product, customer support, expand to new frontiers and continue to support shops on its Store to sell to global markets.
Led by Avenir Growth Capital and Tiger Global Management LLC, the funding gives the payment gateway company the latitude it needs to go public. Olugbenga Agboola, CEO and co-founder of the company told Reuters it is a plan it already has.
“We may consider the possibility of listing in New York or a possible dual listing in New York and Nigeria,” Agboola said.
The funding also takes the valuation of Flutterwave to over $1 billion making it the second unicorn fintech company in Africa. That title will now be held by two indigenous Nigerian companies, Interswitch and Flutterwave – only.
Interestingly, Interswitch and Flutterwave also share the ambitions of listing on international stock exchanges very soon. In the case of Interswitch, the plan has been in the works since 2018.
But importantly, as activities begin to pick up in the AfCFTA, Nigeria will find itself at the driver’s seat directing the movement of payments from one corner of the continent to another. A World Bank report estimates that roughly 66 percent of sub-Saharan Africa’s 1 billion people do not have a bank account. To bridge the gap, financial technology (fintech) is seen as the most viable option given the growing penetration of mobile devices. Nearly half a billion of the population in sub-Saharan Africa subscribe to mobile services.
In the past five years, fintech-focused companies have led funding activities on the continent. They received the bulk of the over $2 billion venture capital funding that startups raised.
According to a table compiled by Britter Bridges, Nigeria occupies the top three places of payment gateway companies that have raised the most funding; Paystack ($200m), Interswitch ($200m), and Flutterwave ($170m).
A payment gateway is a technology used by merchants or retailers to accept debit or credit card purchases from customers. The term includes not only the physical card-reading devices found in brick-and-mortar retail stores but also the payment processing portals found in online stores. In essence, the payment gateway company works as the middleman between the customer and the merchant, ensuring the transaction is carried out securely and promptly.
Billions of transactions are facilitated between the three Nigerian companies. Flutterwave, for example, said it has processed 140 million transactions worth $9 billion and its infrastructure can reach 33 countries in Africa. Flutterwave has an active presence in 11 countries, including Nigeria, Ghana, Kenya, and South Africa.
In a 2018 Debt Issuance Programme, Interswitch disclosed that it processes over 300 million transactions in a month which could worth roughly over $30 billion. Interswitch’s reach across Africa is very extensive as it owns a 60 percent stake in Bankom, a Ugandan payment switching company, and a majority stake in Paynet, East Africa’s payment provider.
Paystack on its part has over 60,000 customers, including small businesses, larger corporates, fintechs, educational institutions, and online betting companies. The company processes over $100 million in monthly payment volumes and over 50 percent of all online payments in Nigeria. Although Paystack only has a physical presence in Nigeria and Ghana, after the $200 million acquisition by Stripe, there now plans to extend the company’s reach to countries like South Africa, Kenya, and other African countries.
Africa’s payment space is growing but it remains disjointed and the high cost of transactions remains a barrier for millions of prospective customers.
“Not only did we start from scratch to build a payment product never built before, but we did this in a space that was so fragmented that someone in Rwanda didn’t have an efficient way of sending money to someone in Nigeria, before 2016,” Agboola said in a company statement.
Africa has the highest costs in the world averaging around 9 percent for making a transaction of $200. This cost is quite high when compared to the world’s average of 7 percent. Flutterwave and other fintech companies are taking a crack at the problems. For Flutterwave it has Barter which makes it easy to send money to different countries instantly at no cost. The product has acquired 500,000 unique users.
Other participants in the funding include DST Global; Early Capital Berrywood; Green Visor Capital; Greycroft Capital; Insight Ventures; PayPal; Salesforce; Tiger Management; and WorldpayFIS 9yards Capital.
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