Australian buy now, pay later platform Zip Co has acquired the remaining shares of South African BNPL startup Payflex. The Australian company acquired a 24.7% stake in Payflex back in April.
Zip Co has made other acquisitions in the Africa-Middle East BNPL space. Back in May, the company acquired Dubai-based BNPL Spotii for US$16 million. Spotti continues to compete in MENA under its own brand.
Elsewhere in the world, Zip Co owns Twisto in Europe and a 25% stake in Philippines BNPL TendoPay. And in the U.S., it owns QuadPay, which it has rebranded as Zip.
Zip Co had FY21 revenue of $403.2 million, up 150% year on year. Zip Co has 7.3 million active customers and 51,300 active merchants. Notably, Zip Co’s share price fell after the recent earnings announcement. Perhaps investors are expecting more in a space that is growing at such a feverish pace.
Zip Co sees its acquisition of Payflex as giving it a first-mover advantage in a region with a large, youthful population of mobile-payment users.
Given Zip Co now has a presence in MENA and South Africa, we wonder what further plans it has for the region?
We certainly expect to see more international BNPL companies enter the Africa and Middle East market.
Already we’ve seen Afterpay invest US$10 million in Dubai-based BNPL Postpay. Since making that investment, Afterpay was itself acquired by Square.
We also saw Checkout.com, an international payments platform, make a US$110 million investment in the Saudi BNPL Tamara. While that deal was not presented as an acquisition, our understanding is that Checkout.com acquired a controlling interest in Tamara.
We expect to see new African startups and existing fintech players make quick pivots into BNPL. We also expect to see each of the major African markets see new BNPL startups. And existing players like Kenya’s Lipa Later and Nigeria’s Buy Now Pay Later try to gain attention with new funding, new products, market expansion. Something.
One such pivot example appears to be M-Kopa. Babájídé Dúróshọlá, M-Kopa’ GM-Nigeria, suggested on Twitter that his company is working on a BNPL pivot. And he suggested that while it may begin with its core products, including phones and solar panels, it has wider ambitions.
This makes sense, given M-Kopa's mission is to finance key purchases for the underbanked.
Still, it’s not as easy as flipping a switch. BNPL requires capital and it entails risk. A platform that doesn’t use cutting-edge technology to manage its risk might get by in a growing economy. But it may risk collapse at the first sign of a downturn.
So the Zip Co news likely will add to a sense of urgency to enter or expand in Africa’s growing BNPL industry. Other international players will be hunting for acquisition targets.
There may have been no better motivator to act than yesterday’s news that U.S. BNPL Affirm saw its share price jump 40% on news that it had signed a deal with Amazon to offer BNPL to Amazon consumers spending US$50 and up. By the way, Zip Co has had a similar deal with Amazon Australia since 2019.