Why Stripe Prevented Paystack From Growing Outside Africa A few years ago, Stripe bought Africa's fastest-growing startup, PayStack, for a staggering $200 million and praised the founders for building such an amazing company in such a short time. Like many, I believed that they would immediately absorb Paystack and go on to Stripe, but they didn’t. Instead, Stripe let PayStack exist as a subsidiary and basically keep doing what it was doing. It wasn’t until the economy took a turn for the worse that Stripe had to lay off 14% of its staff. Consequently, Paystack's CEO had to do the same and lay off almost 20% of their team, which consists mostly of hires outside of Africa in the UK and the UAE. However, as I spent the last few weeks doing extensive research on the payments industry in Africa and its many opportunities, I finally had a chance to talk to people closer to the companies and learn what caused the sudden change in geographical strategy. While many companies dream of making it big in the US or in Europe after they have captured their own market, so did Paystack. But, once Paystack sold to Stripe, ambitions quickly had to give way to reality and fit within the bigger scheme of things at Stripe HQ. Let me explain… While most payment companies in Africa are very focused on Mobile payments, there are actually very established players that have seen tremendous success in the card-based payments space. By focusing mostly on helping international and local enterprise businesses process payments domestically and cross-border, companies like Interswitch Group, Flutterwave, and even e-commerce platform Jumia Group are responsible for the majority of the volume processed outside of mobile money. So, instead of letting Paystack grow into regions outside of Africa, being a subsidiary of Stripe, this didn’t make a lot of sense, as that would interfere with the plans Stripe had for its own global growth. By letting Paystack be its own entity and focus on what I believe are at least five of the six most important Payment markets in Africa, namely Nigeria, Ghana, Egypt, Kenya, and South Africa, Stripe is betting that Paystack can be the most dominant Payments Service Provider in Africa. Undoubtedly, one day, when the time is ripe to either spin off through an IPO, sell to a Private Equity firm, or still totally absorb into their organization. But as with other companies who have thrown around millions or even billions, like PayPal did with Braintree and Worldline had with Ingenico if you don’t do it early, it will be more challenging to do later down the line, causing you to maintain different infrastructures and missing out on the economies of scale. Let me know what you think, will Paystack be able to become the biggest Payments Processor in Africa? Or did they sell to early? P.S. If you missed my deep-dive newsletter on Africa yesterday, check it out here: https://buff.ly/3xwcYPH
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Dwayne I sure appreciate all of your posts. This is a good one!
Interesting insights into the dynamics of the payments industry in Africa and the strategic decisions made by Stripe with Paystack Dwayne Gefferie
Love the discussions on payments in Africa! Thanks Dwayne Gefferie - yes, I do think they sold too early! Same startup in a different geography would have valued way higher and the founders would have probably waited longer. Am sure Paystack will phoenix in some way!
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8moHey Dwayne Gefferie, I think these series of posts on payments in Africa are really interesting. Keep it up! Another way you can look at this is the other way around: why aren't the big players big in Africa? Is it because the US payment system is very card-centric and therefore completely different from Africa? What am I missing here?