Paystack Expands to South Africa Following Stripe Acquisition

Nigerian fintech startup Paystack has maintained a comparatively low profile since its acquisition by the major fintech corporation, Stripe, last October. The transaction, valued at over $200 million, significantly impacted the African technology landscape and provided validation for the efforts of founders, startups, and investors.

Official Launch in South Africa

The payments company, which empowers businesses through its payment API, is now formally announcing its launch in South Africa, with active operations already established in Nigeria and Ghana.

Growth and Market Share

In 2018, Paystack was reported to facilitate 15% of all online payments within Nigeria when securing its $8 million Series A funding round – a round also led by Stripe.

At that time, the company served over 10,000 businesses and planned to utilize the funds for expansion across other African nations. Ghana was identified as the initial target for this growth.

Since its entry into Ghana, Paystack has experienced substantial growth, now processing 50% of all online payments in Nigeria and serving approximately 60,000 customers.

These customers span a diverse range, including small businesses, large corporations, fintech companies, educational institutions, and online betting platforms.

Stripe's Expansion and Paystack's Role

The South African launch followed a six-month pilot program, initiated shortly after Stripe completed its acquisition of Paystack.

Stripe is preparing for a highly anticipated Initial Public Offering (IPO) and has been actively broadening its reach into new markets.

Prior to acquiring Paystack, Stripe had added 17 countries to its platform within an 18-month period, but none were located in Africa.

Paystack represented a key entry point into the African online commerce market, a point emphasized by Stripe CEO Patrick Collison following the acquisition.

Future Growth Potential

Collison stated, “There is a considerable opportunity. While Africa may be smaller in absolute terms compared to other regions currently, online commerce is projected to grow by approximately 30% annually.”

He further explained, “Even amidst broader global declines, the number of online shoppers is increasing at twice the rate. Stripe operates with a long-term perspective, as we are an infrastructure provider, and we are considering what the world will resemble in 2040-2050.”

Accelerated Pan-African Expansion

Although Stripe’s $600 million Series H funding round in March was primarily intended for European expansion, its deeper involvement in Africa has begun.

Paystack had a pre-existing expansion roadmap, but its partnership with Stripe is accelerating the realization of its pan-African ambitions.

Currently, Africa represents three of the 42 countries where Stripe provides services.

Paystack's Vision for South Africa

“South Africa is a crucial market on the continent, and our launch here marks a significant step towards our goal of fostering commerce throughout Africa,” stated Paystack CEO Shola Akinlade.

“We are dedicated to building the financial infrastructure that empowers ambitious businesses in Africa, enabling them to scale and connect with global markets.”

Navigating the South African Market

The six-month pilot program involved collaboration with various businesses and the establishment of a local team to manage operations on the ground.

However, unlike Nigeria and Ghana, where Paystack has achieved a leading position, the company will encounter significant competition in South Africa from established players such as Yoco and DPO.

Competition and Innovation

Abdulrahman Jogbojogbo, a product marketer at Paystack, noted, “The potential for innovation within the South African payment sector remains substantial.

Digital payments currently account for less than half of all transactions in the country, so competition is not only welcome but also encouraged. Increased innovation will accelerate our objective of creating a unified African market.”

Simplifying Online Payments

Khadijah Abu, head of product expansion, added, “We recognize that accepting online payments can be challenging for many businesses in South Africa.

Our pilot program in South Africa focused on removing barriers to entry, streamlining paperwork, providing comprehensive API documentation for developers, and simplifying the process of accepting online payments.”

Paystack vs. Flutterwave

Paystack is often compared to Flutterwave, another prominent fintech unicorn in Africa.

Founded just a year apart, both companies facilitate payment acceptance for thousands of businesses.

Flutterwave recently secured $170 million in funding and claims to serve 290,000 businesses.

While Flutterwave has pursued rapid pan-African expansion, with a presence in 20 African countries, Paystack has adopted a more deliberate approach.

A Measured Approach to Expansion

Paystack attributes this strategy to the unique characteristics of each African country and the varying regulatory landscapes, emphasizing that launching at scale requires time.

Jogbojogbo explained, “Our priority is not simply to establish a presence in numerous countries without regard for service quality.

We are committed to delivering an exceptional end-to-end payment experience in the countries where we operate, and this necessitates careful planning and foundational work.”

Future Outlook

Backed by Stripe and with substantial financial resources, Paystack may eventually adjust its approach.

Even while operating independently, its pan-African vision aligns with Stripe’s objectives, and speed will be critical. The company acknowledges this and anticipates an accelerated pace of expansion as it enters additional African markets.