Stripe Spends $200 Million to Acquire a Leading Nigerian Fintech Company

By Bruce Harpham Tuesday, October 20, 2020

Stripe acquired Paystack, a fintech company based in Nigeria, for $200 million in mid-October 2020. The deal significantly expands Stripe’s presence in Africa. The deal answers a question that Stripe watchers have wondered all year: how would the company use the $600 million in new funding it acquired in the spring of 2020.

Why Did Stripe Acquire PayStack?

By acquiring PayStack, Stripe gains a significant presence in Africa. PayStack has more than 25,000 active merchants on its platform. Acquiring that number of merchants organically might have taken years. Even with Paystack’s customer base, there is still plenty of room for expansion in Nigeria. According to Nigeria’s Corporate Affairs Commission, there are more than three million registered companies in the country.

Also, PayStack brings the ability to process a large volume of payments. PayStack first processed $3 million in monthly payments back in 2017. That existing payment capacity means that Stripe can expand further in Nigeria without building significant infrastructure from scratch.

Stripe Has Been Interested in PayStack for Years

Stripe’s acquisition in 2020 dates back to an investment several years ago. In 2018, Stripe played a leading role in Paystack’s Series A funding round and Visa, one of the world’s largest credit card companies. As a prior investor, Stripe would be well informed about Paystack’s growth prospects. Stripe’s expansion to Africa is just one sign of the continent’s dynamic startup economy.

Nigerian Ecommerce Industry — Already Worth $12 Billion

According to the US International Trade Administration, “The current Ecommerce spending in Nigeria is estimated at $12 billion, and is projected to reach $75 billion in revenues per annum by 2025.” That growth rate may increase even further thanks to the COVID-19 pandemic, which has increased ecommerce volumes.

PayStack has built a significant market share in Nigeria. By 2018, the company processed 15% of all online payments in Nigeria. By acquiring PayStack, Stripe can tap into Nigeria’s growing ecommerce economy, which is already worth billions. Major ecommerce companies in Nigeria include Jumia Nigeria (which has over six million customers) and Konga (which has more than 700 employees). Konga also operates an online payment service called KongaPay, which launched in 2015.

There are Hundreds of Fintech Companies in Africa

There are over 400 active fintech companies in Africa, according to research from Tellimer. Furthermore, 80% of those companies are native to Africa. Earlier in 2020, two other African fintech companies were acquired. In June 2020, there were two major fintech acquisitions in the broader region. TPAY Mobile, a fintech firm based in the United Arab Emirates (UAE), acquired Payguru in June 2020 for an undisclosed amount.

MFS Africa’s acquisition of Beyonic shows that Stripe has serious competition in the region. Beyonic offers payment solutions for small and medium-sized companies in Ghana, Uganda, Tanzania, Kenya, and Rwanda. By becoming part of MFS Africa, the combined company has serious resources. MFS Africa’s mobile wallet platform is available in more than 30 African markets.

It remains to be seen if Stripe and Paystack can expand successfully into the sub-Saharan market. According to GSMA, there are more than 400 million mobile phone users in sub-Saharan Africa. Those phone users represent potential users for Stripe and Paystack or other fintech firms.

Paystack Acquisition Fits With Stripe’s Past Acquisitions

Since Stripe remains a privately owned company, thoroughly analyzing its acquisition record and financials is challenging. In 2019, Stripe acquired Touchtech Payments to secure its position in Europe. Established in 2014, Touchtech Payments focused on meeting high European demands for customer authentication.

ZoomInfo estimates that Touchtech Payments has approximately $2 million in annual revenue. If that estimate is accurate, it tells us something about Stripe’s strategy. Touchtech didn’t significantly grow Stripe’s customer base. Instead, the acquisition positioned Stripe for long term success in Europe. Also, acquiring robust customer authentication technology will help Stripe to maintain customer confidence in the platform’s security.

Does Stripe Need to Worry About Visa’s Interest in Fintech?

Stripe and Visa have a complicated relationship. Both invested in Paystack in 2018. From an operational perspective, Visa credit card payments are processed through the Stripe platform. Despite this cooperation, Visa has put billions of dollars into Fintech and competing for market share against Stripe and other Fintech players.

In January 2020, Visa spent over $5 billion to acquire Plaid, the company behind Venmo. It is estimated that the company has more than 200 million consumer accounts. Through this acquisition, Visa has further reinforced its already leading position in the payments industry.

More importantly, Visa has an extensive global presence and resources that Stripe can only imagine. As of September 2019, Visa had $7.8 billion in cash on its balance sheet. Visa also reported $12 billion in net income for 2019. In contrast, Stripe’s annual revenue is estimated at less than $400 million.

About the Author


Headshot of Bruce Harpham

Bruce Harpham is an author and marketing consultant based in Canada. His first book "Project Managers At Work" shared real-world success lessons from NASA, Google, and other organizations. His articles have been published in CIO.com, InfoWorld, Canadian Business, and other organizations. Visit BruceHarpham.com for articles, interviews with tech leaders, and updates on future books.

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