Paystack expands into South Africa, intending to capture the continents eCommerce market
Paystack expands into South Africa, intending to capture the continent's eCommerce market
Paystack, a Nigerian fintech startup, has announced its official expansion into South Africa, one of Africa's largest markets.
Paystack was founded in 2015 by Shola Akinlade (CEO) and Ezra Olubi (CTO) and operates in Nigeria and Ghana.
In 2018, it raised a $8 million Series A round, which it intended to use to fund its expansion into Ghana. Stripe, the US payments giant, acquired Paystack for $200 million in October 2020, paving the way for a massive expansion into the African market.
Paystack's expansion into South Africa began with a six-month pilot phase that began likely a month after Stripe's acquisition.
Paystack reportedly collaborated with a variety of businesses during this phase and built a local team to manage on-the-ground operations.
“We are aware that accepting payments online can be challenging for many businesses in South Africa. Our pilot in South Africa was laser-focused on lowering entry barriers, automating tedious paperwork, providing developers with world-class API documentation, and making it significantly easier for businesses to accept payments online,” says Khadijah Abu, Paystack's head of product expansion.
The company, which Stripe of the United States backs, intends to capitalize on Africa's growing online commerce sector.
Currently, the continent of Africa accounts for less than 3% of global eCommerce activity, and payments are just one of several significant challenges facing eCommerce on the continent. However, this could change dramatically with the right approach, and Paystack appears to be betting heavily on that growth.
Crunching numbers
Paystack claimed in 2018 that its platform processed 15% of all online payments and was used by 10,000 businesses. With an estimated 60,000 businesses by 2021, the company now claims to be responsible for up to 50% of all online payments in Nigeria.
According to TechCrunch, Paystack's software is used to collect payments globally by MTN, SPAR, and UPS.
While Paystack has not confirmed what online payments entail, the Nigerian Interbank Settlement System (NIBBS) reports that Nigeria processed $58 billion in online real-time interbank transactions in March 2021.
Even if ATM and USSD transactions — which are included in the NIBBS data — are eliminated, Paystack may still receive billions of dollars in monthly payments.
Startups such as Fluuterwave and Kuda also raised record-breaking sums during their record-breaking fundraises. While these figures provide cause for optimism, they leave some questions unanswered.
Slow and effective growth
Paystack's growth has appeared to be slower than that of Flutterwave, which is now present in 20 African countries.
Abdulrahman Jogbojogbo, Paystack's product marketer, tells Techcrunch that its goal is to avoid expanding its presence in countries at the expense of service quality. Each expansion, he believes, requires "careful planning and a great deal of behind-the-scenes, foundational work."
With the country planning similar expansion to other African countries, Africa's payment space is set to see some fierce competition from Paystack, Flutterwave, and Yoco. And that could be beneficial.
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