Global financial services group Visa is set to spend $200 million to acquire 20% stake in Nigerian based payments group, Interswitch.
According to a Sky News report, both companies are in advanced talks and the transaction could be announced as soon as this week. Update: Both companies have put out a joint press release confirming the transaction.
The investment makes Interswitch one of the most valuable African FinTech businesses with a valuation of US$1 billion. Visa will join globally renowned investors, Helios Investment Partners, TA Associates and IFC, as shareholders in Interswitch, alongside Company management.
This is exciting news for Mitchel Elegbe-led payments company that is also expecting to list of the London Stock Exchange through an Initial Public Offering (IPO) in the first quarter of next year. Though this IPO has been long expected and has been postponed for various reasons.
This is an important acquisition for Visa who would not want to be left behind in the incursion of global payment companies into Africa. Some months ago, rival company, Mastercard, invested $300m in Dubai-based Network International ahead of its stock market debut in London.
Unlike many other African fintech companies, Interswitch is already profitable and is keenly investing in the payments related space to increase its prominence in Africa.
It has been involved in some acquisitions in recent deals such as its acquisition of 60% stake in eClat healthcare services. In 2016, Interswitch acquired the mobile financial services player, VANSO. Interswitch had earlier closed the acquisition of Paynet Group in February 2015 in a deal that resulted in the creation of a combined network of over 100 financial institutions, deepening Interswitch’s footprint in East Africa.
The company is also thinking of becoming a Payment Service Bank (PSB) with the raising of 23 billion Naira for this effort.
In as much as this is a very good deal for Interswitch, one wonders what will happen to Interswitch’s home grown card brand, Verve. Interestingly, when Verve was born in 2009, not many people gave it a chance against big players like Visa and Mastercard. Even some companies didn’t believe in it. However, the card brand has grown larger than life in Africa.
It is estimated that Verve has about 19 million cards in circulation and its recent partnership with Discover Global Network, has made it possible for cardholders to use their cards in more than 190 countries and territories globally. It recently partnered with Ghana Interbank Payment and Settlement Systems Limited (GhIPSS) so that Verve Card users can now transact across all channels in Ghana.
The business also operates Quickteller, a leading multichannel consumer payments platform, driving financial inclusion across Nigeria with over 270,000 access points, as of 2018, from which consumers can initiate peer-to-peer transfers, bill payments, airtime purchases, and other e-commerce transactions, processing over 42 million transactions monthly as of 31 July 2019 (equivalent to over NGN560 billion (US$1.5 billion) through direct, indirect and Paypoint channels).
The partnership will create an instant acceptance network across Africa to benefit consumers and merchants and facilitate greater connectivity for communities. Both parties will also retain their respective independent solutions, and Interswitch will retain its scheme neutral strategy.
Mitchell Elegbe, Founder and Chief Executive of Interswitch, said; “Sub-Saharan Africa is the fastest growing payments market in the world, with growth driven by a young and dynamic population, rapidly evolving consumer behaviour, and an increasing desire for payment solutions that can be accepted across the continent and abroad. I am delighted that Interswitch has formed a partnership with Visa, with whom we plan to drive the next phase of transformation in the African payments landscape.”
Andrew Torre, Regional President CEMEA, Visa, said; “Africa is a priority region for us, and we continually seek strategic partnerships with local players to further strengthen our leadership position and enhance the payments ecosystem across the continent. This partnership aligns with our global strategy to work with and invest in innovative partners, and we look forward to working with Interswitch to provide new consumer and merchant experiences and support the rapid growth of digital commerce across Africa.”
Babatunde Soyoye, Helios’s co-founder and Managing Partner, added, “A strategic investment by Visa, the world’s leader in digital payments, into Interswitch is a substantial endorsement of the Company’s expertise in African payments. As an active investor in leading African payments businesses, we see tremendous opportunities to digitise payments across the continent and have worked closely with Interswitch’s management team to build a high quality and scalable platform geared to address some of these opportunities. We look forward to further collaboration with the Company alongside Visa.”
The transaction is subject to the relevant regulatory approvals and is expected to close by Q1 2020.
