Nigerian digital banking platform FairMoney has acquired small business merchant payment service PayForce (a YC-backed sub-brand of CrowdForce) as the digital lender looks to expand its merchant financial services offering.
Both startups declined to disclose the terms of the deal. However, according to sources, the deal was a cash and stock deal between $15 million and $20 million. As part of the deal, CrowdForce CEO Oluwatomi Ayorinde will join FairMoney, where he will lead the company’s payments division: PayForce by FairMoney.
Most African consumers and businesses are financially underserved, and with 64 million unbanked people in Nigeria, according to the World Bank, there is a huge opportunity for both groups of clients to access financial services. .
While FairMoney leads the credit-focused neobanking game primarily targeting retail customers, CrowdForce offers agency banking through PayForce, a branchless banking model that extends financial services to the last mile through a network of human ATMs. However, multiple iterations, competition-driven innovation and increased venture capital have led both companies to move beyond their flagships into multiple offerings as the digital retail and banking space businesses gain momentum.
PayForce launched by providing merchants with point-of-sale devices and liquidity through a network of partners, allowing retail customers to issue, withdraw, transfer and offer cash and bill payments (the company told TechCrunch last year that it has a Nigerian bank largest liquidity among agency networks, approximately ₦1.7 trillion). The fintech, which serves more than 10,000 businesses, has revamped its product line to include business banking, financial team tools, B2B payments and virtual cards. It raised $3.6 million in a Series A round last February.
FairMoney, on the other hand, started with a digital loan product that mainly includes loans for retail customers ranging from 15 days to 24 months. The company, which secured a $42 million Series B round in 2021, now offers checking and debit cards, P2P transfers and payments to more than a million retail and small business customers, which have become a big part of its business, CEO Lauryn Haney said. TechCrunch. in the call.
According to Haini, the acquisition offers benefits to PayForce-acquired merchants that use FairMoney as their primary bank, such as an 18% annual return on deposits, a rate that customers like on the platform. He also said that FairMoney will develop specific loan products for various business groups, addressing one of the biggest challenges facing small businesses in Nigeria: access to loans and working capital. Additionally, it’s not a stretch to think that FairMoney may be looking to bank some of the offline customers that CrowdForce has served for years.
“We see ourselves as a retail bank, but the line between merchants and retail is often blurred. We’ve been thinking more about the commerce space and we see a lot of potential synergies between PayForce and what we’ve built independently,” he added. “If we combine the two businesses, we know their merchants will benefit from the same things our retail customers enjoy.”
As consumer digital banking startups such as FairMoney and Kuda enter merchant banking, fintechs on the other side of the table, including OPay and Moniepoint, are acquiring retail customers. However, the transition has not been smooth for most of these players due to the different banking needs of different customer profiles within the same app. As one of the dominant neo-retail banks, FairMoney PayForce — which Haini says helps small businesses solve multiple problems and better understand their finances and generate more revenue through its “thoughtful” product — hopes to provide it with a much-needed bank. a merchant-driven value proposition that strengthens its position in the country’s corporate banking space.
“Our view is that PayForce has an advantage because their software is designed for CFOs and small business owners,” said Haynie, expressing his opinion about competing in the acquired business space. “PayForce helps them make more money than many other competitors, which we consider branch banks, because they didn’t build the product with the merchant in mind; they create the product with the agent in mind. There’s a big difference here, so we’re not worried about the competitive landscape there.
Indeed, FairMoney wants to gain more market share through the acquisition and become Nigeria’s “number one” retail and business bank, as Haynie puts it. The fintech is looking to add credit cards, remittances, stocks and investment products for its individual customers – while also adding payroll services, BNPL and merchant matching to its suite of business products.
In addition to increasing its stack, FairMoney is actively involved in several acquisition conversations. The Tiger Global-backed fintech is in talks to raise more than $30 million in bridging funding from new and existing investors, which will be used to complete these acquisitions (including PayForce) and expand operations outside of Nigeria and into Africa. sources familiar with the transaction. . Haynie declined to comment.
There has been an increase in acquisitions in Africa recently. According to the report, domestic acquisitions increased from 31% in the second quarter to 52% in the third quarter of 2022, reflecting a trend of increased consolidation spurred by falling prices and the crunch in venture capital. Despite these signs, major exit opportunities could lead to a selloff in current market conditions, as was the case with CrowdForce, according to its predecessor.
“There are many ways to win. To win, a startup needs a great product, strong execution, marketing and funding. Investors mainly provide funds. This acquisition gives CrowdForce and its investors an integrated value proposition to start executing, generate revenue and create value for all shareholders. In a fast-moving market like Nigeria, time and speed are of the essence,” Ayorinde said when asked if Abuja-based CrowdForce should sell as it faces a challenging fundraising environment.
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