BusinessDay

OPay’s $2bn valuation equals 33% of Nigeria’s biggest banks

The new $2 billion (N822bn) market valuation of OPay, the Chinese-backed Africa-focused digital bank, makes it equivalent to a third of the N2.4 trillion market capitalisation of Nigeria’s top five banks.

The fintech company on Monday closed a record $400 million funding round led by Japanese-based venture capital finance vehicle, Softbank Vision Fund 2, managed by Softbank. Interestingly, this is the first time Softbank is investing in an Africa-focused tech company, joining the likes of Quona Capital and Valer Ventures, which backed tech companies in Africa for the first time in 2021.

The $400 million funding is the largest raise by any African-focused fintech company.

Participants in the funding round were previous investors Sequoia Capital China, DragonBall Capital, the Venture arm of Chinese food-delivery giant Meituan, Redpoint Chine, Source Code Capital, SoftBank Ventures Asia, and 3W Capital.

OPay, which has a microfinance bank (MFB) licence from the Central Bank of Nigeria (CBN), becomes the second largest bank in Nigeria in view of its $2 billion market valuation and giving it 33 percent of the market valuation of top Tier 1 banks.

The five biggest banks in Nigeria include United Bank for Africa (N258.206bn); FBN (N265.63bn), Access Bank (N319.907bn), Zenith Bank (N762.935bn), and GTCO (N822.016bn).

OPay had in 2019 secured $120 million from Sequoia Capital, IDG Capital, Source Code, GSR Ventures, and Meituan-Dianping, which pushed its valuation to $500 million.

Read also: EMTECH, GIC partner to bring Nigerian regulators closer to fintechs

Founded in 2018, OPay, a subsidiary of Opera, has primarily focused on the Nigerian payment market before venturing out to other countries on the African continent from 2020.

As of 2020, OPay said its monthly transaction grew 4.5 times to over $2 billion in December.

The company also accounts for about 80 percent of bank transfers among mobile money operators (PoS) agents in Nigeria and 20 percent of the non-merchant point of sale (PoS) transactions.

At the end of 2018, the company had 2,400 agents, and by 2019, it had pushed that number to 40,000 agents. In May 2020, the company said it had 300,000 agents.

Bloomberg, which broke the funding story, reported that the company’s monthly transaction volumes now exceed $3 billion.

Aside from an MFB, OPay has also secured an international money transfer licence and is in the process of completing a deal with WorldRemit.

The company plans to deploy the $400 funding into its expansion in emerging markets with a particular focus on countries in the Middle East.

“We want to be the power that helps emerging markets reach faster economic development,” Yahui Zhou, CEO of OPay, said.

Before going into payment full time, OPay was also a major player in ride-hailing, in the days of motorcycle ride-hailing in Lagos State. The company brought intense competition to the likes of Gokada, Max.Ng, until the Lagos State placed a ban on commercial motorcycle business over concerns on insecurity. The logistics pivot, however, was not as lucrative as ride-hailing due to a “harsh business” in Nigeria that affected other businesses as well.

It soon shut down the logistics business including verticals such as e-commerce platforms, OMall and OTrade; and its food delivery feature, OFood was closed down. It also meant the death of OPay’s super app ambition as it focused its energy on digital payment.

The 100 percent attention may have paid off as the company said in March 2021 that it recorded a spectacular year in 2020 amid the pandemic that contributed to increased adoption in e-payment channels.

Point of Sale (PoS) terminals the company deployed in its mobile money agent and merchant network represented roughly ⅕ of offline payments in Nigeria by the end of 2020, according to Joshua Yau, managing VP for OPay in Nigeria. Its mobile wallets had more than 2 million wallets with balances totalling over $17 million.

The company had intensified its expansion from 2020 by launching in markets like Egypt where they appear to be thriving.

“We believe our investment will help the company extend its offering to adjacent markets and replicate its successful business model in Egypt and other countries in the region,” said Kentaro Matsui, managing director, SoftBank Group Corp and former managing partner at SoftBank Investment Adviser, which oversees Vision Fund and Vision Fund 2.

Opera said in June 2021 that it sold 29 percent of its stake in OPay, recording a $31.1 million profit from the deal.

 

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