Interswitch: Africa’s first ‘unicorn’?

An integrated digital payments and transaction processing company in Nigeria has travel companies queueing up, writes Sally White

Travel is at the forefront of the gainers as Africa’s 3.7% growth rate, a soaring population currently numbering around 1.2 billion, expanding cities and cash flow kick in. Yet,that is not enough on a continent where the most polite thing said of its banking sector is that it ‘needs a shakeup’ (Africa Progress Panel, chaired by Kofi Annan, former Secretary-General of the United Nations and Nobel laureate.)

As the African Progress Panel points out, while around 70% of Africans have a mobile phone, only one in five has any form of account with a formal financial institution. That is a major drag on growth as it means that much of African’s business remains cash-based.

So, commerce should thank Interswitch for helping lay the foundations of a more supportive financial infrastructure. Sensibly, given that their sector is so ripe for disruption, most banks are buying into its innovations. This Nigerian-based, pan-African group has become so successful that in the next few months it is likely to become Africa’s first ‘unicorn’. According to stories in Lagos reported by Bloomberg, Interswitch is preparing an IPO for a flotation in both London and Lagos for which early valuations are of $1billion-plus.

Interswitch describes itself as an ‘integrated digital payments and transaction processing company’. It operates various payment channels such as automated teller machines (ATMS), point of sale (POS) terminals, mobile phones, kiosks, web, and bank branches. The company offers Paydirect, a web-based solution that enables clients to receive payments made by their distributors, agents, and customers into their accounts from banks, AutoPay, a web-based solution that enable clients to make payments from their bank accounts to any beneficiary of their choice, Retailpay, a solution that enables merchants accept and manage cash, cheque, and card payments from their customers and Internet payment options. It also runs a loyalty programme, Reward.

Travel focus

Over the last couple of years, travel companies have queued to link up with it. First were the domestic airlines and now, as its reputation is established, international carriers.  Emirates is one of the latest.

“By integrating to the Interswitch network and adopting their payment solutions and channels, Emirates is adopting a multiple payment platform,” says Manoj Nair, Emirates’ regional manager West Africa in the company’s press release.  “This new feature will make it much easier for travellers to book their itinerary and pay for their flights whether through Emirates website or at any Emirates offices.”

In hotels its partners include SlimTrader, a Sub-Saharan African turnkey ecommerce solution-provider for businesses, for a new Payment Monitoring Portal on the ‘MoBiashara for Hotels’ (MFH) platform. With the partnership SlimTrader is better positioned to facilitate seamless transactions between hotels and their guests. Before, “ hotels had no means of verifying payments for walk-in guests from bookings on MFH’s partner travel booking sites. The lack of clarity meant that payments had to be verified via phone calls or emails – a very inefficient model,” says Interswitch

Interswitch is the brain-child of Mitchell Elegbe, still its CEO, who started the company in his native Nigeria in 2002. An electrical engineering graduate from the University of Benin, he cut his teeth in business as a student, borrowing money from a friend to launch a cassette recording company. However, other students copied the idea, forcing him to move on and he switched to selling shirts.

Post university he began he moved into IT and began his career at Computer Systems Associates in Lagos, as part of a team enabling Nigerian banks to connect to SWIFT. Then, for a decade he worked his way through different roles - at Telnet in business development, Schlumberger as a field engineer in Scotland, and lastly returning to Telnet again, this time as head of group marketing in Nigeria. There he conceived the idea of building a nation-wide money switching company of world-class standard.

Now Interswitch’s product platforms process the bulk of Nigeria’s growing volume in electronic banking, government, and corporate financial transactions. The company has spread its operations into five other countries and has widened its services with add-on acquisitions.  

Elegbe has never been short of backers. In 2010 he successfully pitched for a $92 million tranche in return for 52% of the equity of Interswitch from Helios Investment Partners, an Africa-focused private equity group. They have obviously judged that now is the right time to take some profit - though it is yet unknown how much of their stake they will off-load.

Interswitch just says it is considering several strategic options, including an IPO, but no final decision has been made, according to in an e-mailed statement to news agencies. A spokesman for Helios declined to add any comment to the stories. Of course, there is also the option of a trade sale.

The London Stock Exchange already carries over 120 African company listings and London is a sympathetic market place. Bloomberg reports that if the rumoured deal goes ahead, this would be one of the few private equity exits at a valuation of over $1 billion. It says that since the increasing use of e-commerce worldwide means that the payments-processing industry is a ‘structural growth market’, Interswitch would be very attractive to investors.

Related Reads

comments powered by Disqus