Business growth in Africa requires better payments infrastructure, and that effort received a significant boost this week when Stripe, Visa and other firms invested $8 million in Paystack.
The Nigerian company enables developers to create payment tools via its APIs, and connects multiple payment processors by handling transactions for merchants and consumers. The investment will not only help fund the firm’s growth, but also serves as validation of the startup, which launched about 2-1/2 years ago.
The announcement of the investment helps rounds out a promising August for the prospects of improving digital payments and eCommerce capabilities in Africa. Alibaba Group Holding’s founder and chairman Jack Ma said the company “will do anything to share technology” with Africa. He has also set aside $10 million for a fund for African entrepreneurs and has argued for more favorable tax conditions for eCommerce startups.
Paystack already processes about 15 percent of online payments in Nigeria, which is Africa’s largest economy, ahead of South Africa and Egypt. In an interview with PYMNTS, Paystack CEO and Co-founder Shola Akinlade said one of the company’s main goals involves speed.
“How fast can we help connect businesses?” he said when talking about Paystack’s mission and work. He told PYMNTS how it can take businesses three weeks to get the proper digital connections and associated technology in order to take online payments, but that Paystack can do it in much less time. Its clients include telcos, airlines, government agencies and other organizations.
“We want to give businesses a reliable way to get paid and help them grow,” Akinlade said.
That said, Paystack’s home country is experiencing a decline in banked adults. Bloomberg has reported that financial inclusion in the African country has declined close to 4 percentage points from 2014 to 2017, now standing at 39 percent, at the same time that the Sub-Saharan African average of banked people has increased more than 8 percentage points to 43 percent.
Paystack and other companies have their work cut out for them. “There is a lot of (payments) volume happening” in Nigeria, Akinlade said during the interview. “There are a lot of transactions. Very few of those transactions happen online, but it’s still early."
That’s not the only challenge for payment providers working there. Literacy rates are low by Western standards, and many merchants and consumers are unfamiliar with cutting-edge payments technology. That’s why companies must build “simplicity” into their products, Akinlade said. And, as Ma's comments indicate, the infrastructure often lags, meaning payment processors must work around that when dealing with clients.
“If someone doesn’t have the fastest network, we’ll make sure it works,” he said, declining to describe the overall state of connectivity as poor. “Connectivity is good. I just think it can be better.”
The company’s $8 million Series A funding round followed its seed financing of $1.3 million less than two years ago. The new round was led by the payments company Stripe, with other participating investors including Visa, Tencent and Y Combinator. Akinlade said Visa took part in the investment round because “it understands payments problems very well.”
Besides Alibaba’s interest in African digital payments and eCommerce, recent months brought news that Cellulant, a digital payments company operating in 11 countries in Africa, raised $47.5 million in a Series C round — the latest African FinTech startup to recently raise funds. The digital ecosystem might still have a way to go in Africa, but it's clear that the competition is heating up.