The online payments platform development company Stripe announced last year that it will buy the Nigerian-based Fintech company Paystack. Stripe is one of the highly valued privately-owned tech startups. Paystack provides service for about 60,000 businesses in Africa.
Stripe didn't disclose the real worth of the merger and acquisition, but a TechCrunch source put the deal at over $200 million. Fintech industry watchers see this move as one of the most significant in the online payments industry.
With Paystack already processing payments for close to 50% of the online transactions in Nigeria and Ghana, its acquisition by Stripe will boost the expansion of its service to other African countries.
So, what will one of the largest tech acquisitions of a Nigerian-based startup do for Fintech in Africa? Here are more details about the recent merger and its potential to expand online payment processing in Africa.
A Rundown of the Merge
From Stripe's own newsroom, we learn that acquiring Paystack is a move to accelerate online business across Africa. African businesses will grow and global companies will move into the continent with the fastest growth in mobile telephony.
The online economy in Africa is expanding rapidly, with online commerce growth estimated at 21 percent year-on-year. This growth rate is 75 percent higher than the current global average.
The agreement Stripe made to acquire Paystack can lead to a sharp increase in the online GDP of the continent. Paystack's payment solution and APIs make it easy for businesses of varied sizes to process payments online and offline from different parts of the world. Paystack clients use their platform to develop new business models and build better customer relationships.
Presently, Paystack's platform processes over 50 percent of the online transactions in their home country. The company also has plans for rapid growth across Africa and recently started a pilot scheme with South African businesses.
The popularity of online businesses in South Africa has risen in recent years. Having the capability to receive payments online is now a prerequisite for businesses of all sizes. From online shopping sites to bill payments, to online gaming and casinos, the importance of electronic payment systems cannot be overemphasized.
With the ever-increasing number of internet-enabled mobile devices in South Africa, many online casinos are available to gamers within and outside the country. While most of them accept USD as their currency for transactions, many South African casinos now accept the Rand.
Accepting South African Rand for transactions makes it easy for gamers to avoid the additional currency conversion fees when making a withdrawal or deposit. With payment gateways like Paystack, gamblers can take advantage of the most convenient payment method that offers low fees and fast transactions.
What Comes After the Acquisition of Paystack?
The merger will most likely be successful. Paystack and Stripe have had a close working relationship. Stripe led the Series A funding of Paystack in 2018 and has offered professional guidance for the company to scale its operations.
Stripe's business team lead, Matt Henderson, said that the company has achieved in five years what other companies have not been able to achieve in decades. He said that the technology-first approach, the values, and ambition of Paystack align with those at Stripe.
As a result, they believe that acquiring Paystack is a smart decision. The acquisition will allow Paystack to develop new solutions, support new businesses and reduce the fragmentation in the African online payments market.
Paystack's acquisition will not stop them from operating independently. The company will have the freedom to add more global payment methods and scale its operations on the continent.
Over the next few years, Paystack's capabilities will be added to the Global Payments and Treasury Network managed by Stripe. This programmable platform for international monetary movement is now available in over 40 countries.
On his part, Shola Akinlade, CEO of Paystack, is delighted to combine forces with Stripe to nurture creative businesses in Africa. From the Paystack blog, he said he has a firm belief that African tech creators and entrepreneurs can do amazing things when they have access to the right tools.
With the resources obtained from Stripe, the company is set to speed up its geographical expansion, launch additional payment channels, and deepen integrations with other global payment platforms.
Benefits of Online Payments in Africa
A robust payment gateway, like the one offered by Paystack, gives a merchant the ability to expand outside of their local base and boost revenue.
Using online payment systems improves security, reduces costs, and increases the number of payment options. It also appeals to impulse buyers and it helps to increase sales through affiliates.
For companies whose business is based on a subscription model like software-as-a-service, online payment is the most effective way of collecting recurring revenues.
The acquisition of Paystack by Stripe and the growth of various locally developed payment gateways like M-Pesa will boost e-commerce in Africa. Many new businesses will spring up and use these payment platforms to broaden their reach and increase revenue.
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