Stripe's acquisition is part of a wider trend of African fintech startups defyingthe odds during the global pandemic to bag multimillion-dollar M&A deals.
US payments giant Stripe’s acquisition of Nigerian fintech Paystack for a reported $200 million on October 15 is a vote of confidence for African tech companies’ ability to create value for global brands. As Iyinoluwa Aboyeji, founder of the elite pan-African software engineering organization Andela, told Global Finance magazine: “Both are very strong product-focused companies. Stripe specifically recognizes that Paystack has the talent and regulatory approvals required to build for the multiple payment methods and channels that dominate the African payments landscape and wanted to acquire that local expertise market.”
PitchBook, a US-based investor website which provides comprehensive data on private and public markets, values Stripe at $36 billion. Paystack was founded four years ago by two Nigerian computer science graduates, Shola Akinlade and Ezra Olubi, who received early stage funding in Silicon Valley’s Y-Combinator program, a seed money startup accelerator launched in March 2005. The company provides payments systems, works with more than 60,000 businesses in Ghana and Nigeria including FedEx, UPS and MTN and processes hundreds of millions of dollars of transactions each month.
For now Paystack will continue to operate independently but become embedded into Stripe’s global payments and treasury network that spans 42 countries Stripe said in a statement.
According to Aboyeji, the Stripe-Paystack deal has broader implications: “[it is] a signal to global technology players to stop overlooking African based technology companies in their search for potential partners who can help them with market entry into the African continent. … I believe we will see more global players become interested in product-led companies in Africa as they start to understand the limitations technology designed and built in America will have in a market like Africa. Given [that] Africa is poised to be the majority of the world’s working population in 15 years, more global companies will become familiar with what Africa has to bring to the table and learn to put it on an equal footing with what they find elsewhere in the industrialized world.”
Zekarias Amsalu, founder of investment consultancy Ibex Frontier and co-organiser of the Washington, D.C.-based Africa Fintech Summit, concurs: “As a ‘mobile first’ continent with 66% unbanked population and leading the world with mobile money, Africa’s fintech ecosystem has ripened for venture and strategic investments, now accelerated by the COVID-19 pandemic that highlighted fintech’s power of digitization and contactless transactions. The acquisition of Paystack only shows that global players and investors are now noticing and rushing to get into this very important market that will define success of all internet businesses in the decades to come. As a continent that has around 21% average adult mobile money penetration, compared to 2% global average, investment into fintech space like Paystack is only the start.”
Stripe’s acquisition is part of a wider trend of African fintech startups defying the odds during the global pandemic to bag multimillion-dollar M&A deals. Examples include the $288 million purchase of DPO Group—a payments services provider for African businesses—by Dubai-based payments giant Network International and World Remit’s acquisition of Sendwave—an Africa-focused remittances company—in a deal valued at $500 million according to Bloomberg.
According to Amsalu, the acquisition of Paystack ”is not a one-off and Africa will witness several more strategic acquisitions and investment in the months and years to come. Stripe has been ‘dating’ Paystack, as it were, for about 2 years since their Series A investment in 2018 that led to successful ‘I do’ in a form of acquisition. Several other global fintech and tech companies—including Visa, Mastercard, Paypal, Tencent—have been ‘dating’ other leading African fintech startups by participating in investment rounds and in my view the next wave of acquisition comes from those ‘dating’ expeditions as that partnership gives international investors privileged access to strategy, technology, execution and future cash flow. I expect some of these investors will start to woo the fintechs they invested in and follow Stripe’s footstep in forming other ‘I do’s.”