Nigeria’s Interswitch becomes Africa’s latest unicorn after Visa acquires minority stake

US payments technology corporation Visa has acquired a minority stake in Lagos-based digital payments firm Interswitch Group at a valuation of $1-billion, effectively making the fintech company Africa’s latest unicorn.

It follows the listing on the New York Stock Exchange in April of Jumia, which is often dubbed as Africa’s “first tech unicorn” — though some argue it is not truly an African tech company, having been set up by German venture builder Rocket Internet (see this story and this one).

In its statement yesterday announcing the deal, Interswitch did not mention how much Visa had paid for what it described as a “significant” minority equity stake.

Sky News reported in an article on Sunday (10 November) that Visa would acquire a 20% stake in the company for $200-million.

The transaction is subject to regulatory approvals and is expected to close by the end of the first quarter of next year.

Interswitch was founded in 2002 by Mitchell Elegbe

Interswitch said the deal will create an instant acceptance network across Africa that will benefit consumers and merchants.

As part of the deal Interswitch will retain its respective independent solutions as well as its scheme neutral strategy.

Interswitch Group was founded in 2002 by Mitchell Elegbe (pictured above) and specialises in electronic payments processing and switching services in Nigeria.

The company claims as of May this year it has been processing over 500 million transactions per month.

The firm owns domestic debit card scheme Verve and multi-channel consumer payments platform Quickteller.

Interswitch has made several recent acquisitions. These include:

• In September the company acquired a 60% stake in eClat Healthcare, a Nigerian startup that develops hospital management software solutions (see this story).
• In 2016, the group acquired the mobile financial services player Value Added Network Solutions Limited (Vanso).
• The year before that Interswitch acquired the Paynet Group in February in a deal that extended the company’s footprint in East Africa where it has operations in Kenya and Uganda.

‘Substantial endorsement’

Apart from Visa, Interswitch’s investors also include the International Finance Corporation, UK-based Helios Investment Partners and TA Associates.

Helios’s co-founder and managing partner Babatunde Soyoye said Visa’s investment in Interswitch is a “substantial endorsement” of the company’s expertise in African payments.

Visa regional president for Central Europe, the Middle East and Africa (CEMEA) Andrew Torre said Africa is a priority region for the firm and that it is continues to seek partnerships with local players.

“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,” said Torre.

Elegbe said that he is “delighted” that Interswitch has formed a partnership with Visa with whom it plans to drive the next phase of transformation in the African payments landscape.

Here’s how Africa’s tech community reacted to the news on Twitter:

Flutterwave and Andela co-founder Iyinoluwa Aboyeji pointed to how it’s taken Nigeria 18 years to come up with its first “completely homegrown” unicorn (Jumia was founded by Germany’s Rocket Internet), adding that it is possible to build the next one in the next five years.

Thought on my mind today. It took 18 years for us to have our first completely home grown Unicorn. How can we build the next Interswitch in 5 years or less? First we have to believe it is possible.

— E (@iaboyeji) November 13, 2019

Others shared in the euphoria of Africa’s latest unicorn.

I was so happy at the interswitch news, like we're sharing the money

— Olumide (@LohdLippi) November 12, 2019

Some wondered how much higher Interswitch’s valuation would have been if it operated in a larger market.

I always wonder how much higher Interswitch would be valued today if they had achieved what they did in Nigeria in a much larger emerging market, say, Mexico or Brazil.

Or in the US with its fragmented payment market.

— Tunde Leye (@tundeleye) November 12, 2019

Read more: So, let’s call it out – what then is an African startup?
Read more: Interswitch Group acquires Nigerian startup eClat Healthcare
Read more: Jumia raises $196m in New York Stock Exchange IPO
Read more: Jumia story about to become a whole lot more successful [Opinion]
Read more: Loss making African ecommerce giant Jumia files for NYSE IPO
Read more: Jumia, Rocket Internet still mum on whether African tech giant will list in US

Featured image: Interswitch founder, CEO and group managing director Mitchell Elegbe (eClat)