“I do not think anyone in Nigeria needs persuading of the need for urgent action on the environment. Desertification in the north, floods in ... the centre, pollution and erosion on the coast are enough evidence. For Nigeria, climate change is not about the perils of tomorrow, but what is happening today,” President Muhammadu Buhari said during the UN Climate Change Conference (COP26) in October. And today means Nigerians are finding it increasingly hard to afford basic food items.
In 2017, Visa and Interswitch announced a partnership to accelerate the adoption of mobile payments throughout West Africa.
- The partnership saw the upgrade and switch to the mVisa platform.
- It also looked to enable more merchants to accept mVisa payments without the need for investing in point of sale terminals.
Interswitch, founded by Mitchell Elegbe in 2002, began operations as a transaction switching and electronic payments processing company that built and managed payment infrastructure.
Today, it is one of Africa’s largest Africa-focused electronic payments and infrastructure companies, with point-of-sale terminals.
Interswitch is reportedly set to be valued at $1.5 billion ahead of its planned IPO next year.
- The investment from Visa would confirm Interswitch’s status as Africa’s first fintech unicorn.
Interswitch represents a new crop of African companies attractive to global companies for their ability to reach a degree of scale, as Interswitch has done in Nigeria.
It is the largest domestic debit card scheme in Africa, with over 20 million Verve cards in circulation. The partnership with Visa is expected to further expand the acceptance of Verve cards across the African continent.
But they are not alone.
Mastercard has invested $300m in Network International, ahead of its own stock market launch in London.
“Network International, which is the largest payment processor in Africa and the Middle East, has since seen its shares perform strongly, bucking the trend of a stagnant environment for London IPOs”, reports Sky News.
Victor Basta, the Managing director of Magister Advisors, a London-based boutique investment bank, believes a handful of other players can achieve strategic value by developing a broad enough footprint, either in-country or across a range of countries.
- “Arguably, M-Pesa, in a different part of the value chain, has achieved that in Kenya, though of course, it’s not an independent company. I would argue though that it could well be the other fintech ‘unicorn’ embedded in Safaricom,” Basta explains.
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Fintechs still need to be either large enough in key geographical locations or across countries to get into the conversations with global partners.
- “Strategics are not yet, in my view, ready to acquire significant stakes in ‘challengers’ in African fintech, but are certainly ready to acquire broad enough market leaders in a broad range of fintech segments from payments to SME lending to consumer financing of critical needs, for example, energy, etc.,” Basta concludes.
But in Nigeria, there is still a fixation on cash. The Nigerian government is ambivalent regarding its cashless policy, and recently brought forward a new tax on POS transactions.
Olugbenga GB Agboola, Co-Founder and CEO of Flutterwave, told The Africa Report:
- “The real competition is still cash, and if you look at the fintech penetration in Africa, there is still a lot to be done. Interswitch has paved the way and the field is now wide open.”
Flutterwave is also a Visa partner, having launched a consumer payment product for Africa called GetBarter.
- “This deal is huge for Africa and Interswitch. It’s also a validation of the opportunity in Africa and fintech,” Agboola says
In 2016, there was a plan to take Interswitch public, but that failed as Nigeria entered a recession.
Keep your eye on: The Interswitch IPO, scheduled for 2020, will allow Helios Investment Partners, Interswitch’s majority shareholder, to begin selling off its stake in the company.
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