Nigerian fintech startup Paystack has announced its official expansion to one of Africa’s largest markets, South Africa.
Founded in 2015, by Shola Akinlade (CEO) and Ezra Olubi (CTO) Paystack uses its API to help businesses process payments, and with active operations in Nigeria and Ghana.
In 2018, it raised $8 million Series A which it planned to use for its Ghana expansion. In October 2020, US payments giant, Stripe, acquired Paystack for $200 million, to open a huge route to the African market.
Per TechCrunch, Paystack’s South Africa expansion began with a six-month pilot phase that likely started a month after Stripe’s acquisition.
During this phase, Paystack reportedly worked with different businesses and has grown a local team to handle on-the-ground operations.
“For many businesses in South Africa, we know that accepting payments online can be cumbersome. Our pilot in South Africa was hyper-focused on removing barriers to entry, eliminating tedious paperwork, providing world-class API documentation to developers, and making it a lot simpler for businesses to accept payments online,” says Khadijah Abu, Paystack’s head of product expansion.
Backed by US-based Stripe, the company plans to leverage Africa’s growing online commerce sector.
The continent currently accounts for less than 3% of global eCommerce activities, and payments are just one part of several deep challenges that eCommerce faces in the continent. With the right approach, however, this could change drastically, and it seems Paystack is betting highly on that growth.
Recall that in 2018, Paystack claimed it powered 15% of all online payments and had 10,000 businesses on its platform. With a reported 60,000 businesses in 2021, the company now claims it powers up to 50% of all online payments in Nigeria.
Per TechCrunch, the likes of MTN, SPAR, and UPS use Paystack’s software to collect payments globally.
While we’ve not gotten official confirmation from Paystack on what it means by online payments, the Nigerian Interbank Settlement System (NIBBS) reports that Nigeria processed $58 billion worth of online real-time interbank transactions in March 2021.
Even if ATM and USSD transactions — which are part of the NIBBS data — are eliminated, this could still be leaving Paystack with payments transactions worth billions of dollars on a monthly basis.
Startups like Fluuterwave, Kuda also posted similarly massive numbers during their record-breaking fundraises. While such numbers give room for optimism, it leaves some questions unanswered.
Slow and effective growth
Compared to Flutterwave who is now present in 20 African countries, Paystack growth has been seemingly slower.
Abdulrahman Jogbojogbo, the product marketer at Paystack, explains to Techcrunch that the company’s concern is not to have a lot of presence in countries at the expense of service quality. For him, each expansion requires “careful planning and lots of behind-the-scenes, foundational work.”
With the country planning similar expansion to other African countries, Africa’s payment space is set for some robust competition fueled by the likes of Paystack, Flutterwave, and Yoco. And that could be a good thing.