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Nigeria’s Interswitch eyes Kenya and Uganda to extend its payments services

By David Whitehouse
Posted on Tuesday, 16 February 2021 19:33

Victoria Island, Lagos, January 15, 2021. Nigerian small and medium-sized businesses contribute as much as 48% to GDP. REUTERS/Temilade Adelaja

Interswitch is planning to roll out the business payments solution it has launched in Nigeria, Kenya, Uganda and two unnamed countries in West Africa.

The Quickteller Business service will be launched in Kenya and Uganda in April or May after starting this week in Nigeria, head of payments processing Akeem Lawal tells The Africa Report.

Interswitch, founded in Nigeria in 2002, has a physical presence in Kenya and Uganda, but the West African markets will be new for the company, he says in Lagos. Over time, the company aims to leverage its partnership with Visa to become a pan-African payments platform, he adds.

Nigerian small- and medium-sized enterprises (SMEs) contribute as much as 48% of GDP, yet many of them lack digital tools for transactions. Many small businesses in Nigeria have suffered during the Covid-19 pandemic from not being able to convert social-media interest into customers, says Lawal.

Quickteller Business gives merchants a web page that they can share with customers and allows them to accept payments on or offline. The service also allows merchants to find new business customers, partners and suppliers.

The solution can allow SMEs to “start the road to recovery” after Covid-19, says Lawal, a member of the company’s founding management team. Businesses in Kenya and Uganda will get the same three months of free transactions that are being offered in Nigeria, he adds.

Small businesses that sign up will get access to Interswitch’s existing portfolio of 5 million consumers.

  • The work of creating consumer profiles to match merchants with the most likely individual clients is in progress, says Lawal.
  • Consumers and businesses are able to pay taxes to 36 Nigerian states and to the federal government using Interswitch.
  • The company is working on adding tools to allow businesses to manage their inventory and accounting.
  • In December, Interswitch agreed a partnership with Credit Bank in Kenya to create a multi-currency prepaid card that can be funded with mobile money.
  • The company also has a Kenyan partnership with UnionPay International, part of China’s UnionPay.

Unicorn

In 2019, Interswitch claimed the status of a “unicorn” after a 20% stake purchase by Visa valued the company at $1bn. In September 2020, Interswitch was reported to be in talks with potential investors ahead of a planned initial public offering (IPO) in London.

The company declined to comment on any possible IPO.

Strong fundamentals

Analysts say that Interswitch’s recent performance is promising.

If the company’s shares arrive on the stock market, they would offer a play on African e-commerce that avoids the logistical problems associated with delivering goods suffered by fellow unicorn Jumia.

Shares in Jumia now trade at $62 in New York, versus the 2019 IPO price of $14.50, despite its lack of profitability.

  • In June, ratings agency Moody’s said that Interswitch has a “solid profitability and liquidity profile, owing to good cash flow generation capacity”.
  • The company had an average net revenue growth of 17% from 2017 to 2019, with an average EBITDA (earnings before interest, taxes, depreciation and amortisation) margin of 40%.

Bottom line

If e-commerce is Africa’s gold rush, then providers of payment systems are the shovel makers.

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