Paga, Nigeria’s largest mobile payments firm, is applying for membership to Africa’s unicorn club. This much was reported back in June when Paga Group CEO Tayo Oviosu told Bloomberg that unicorn status was coming “in the next year or two.”
Last week the company announced an expanded partnership with Untapped Global to help get it there.
In order to get to a billion-dollar-plus valuation, a company needs a compelling growth story. And evidence that it will deliver. Paga seems to be delivering, at least as measured by the transaction volume flowing through its platform.
In 2020, Paga processed US$2.3 billion in transactions and US$8 billion over the last four years.
Oviosu founded Paga in 2009 and the company gained its operating license in Nigeria in 2012. Since its founding, the company has raised US$36.7 million. Its most recent round was in 2018.
Now to Paga’s expanded partnership with Untapped Global, a San Francisco-based company that provides alternative financing programs in emerging markets. The aim of the partnership is to scale up the installed base of SMMEs using Paga’s POS system.
Paga currently has 33,000 merchants on its platform. Paga is relying on its Untapped Global partnership accelerating its progress to reaching 120,000 merchants within the next two years.
“We are excited to scale our POS rollout program with Untapped,” Oviosu said in a statement. “We have built the best on-ramps and off-ramps for cash in Nigeria through the Paga agent network and are further digitizing merchants via our new merchant platform, Doroki.”
The partnership provides small merchants with the financing they needed to acquire handheld point of sale terminals.
Untapped does this through something it calls smart asset financing. In essence, this is a financing model that recovers its investment from the revenues earned on the devices.A Paga agent location
“The network of the POS devices that will be available for merchants via this partnership is powerful,” Untapped founder and CEO, Jim Chu, said, also in a statement.
“It enables a seamless process for merchants and their customers to buy, sell, and get paid. We're excited to use smart asset financing to greatly increase access to financial services across Nigeria with partners that know the space best, like Paga.”
In a recent interview on Bloomberg TV, Oviosu explained that Paga’s hybrid offline-online business model is key to its ability to grow to unicorn-worthy levels.
“We believe that in Africa, digital-only strategies do not scale,” Oviosu said in the interview (video below).
He said the reasons are pretty simple. Low smartphone penetration and high data costs make it necessary to “meet people where they are.”
He explained Paga’s hybrid model has three elements. The first is a smartphone app for the estimated 10% to 20% of Nigerian’s with smartphones. The next is a USSD application that works on any feature phone. And then there is an in-store option where consumers can complete transactions via local agents.
Paga reminds us of South African POS and online payments company Yoco. The two companies have similar but far from identical businesses. Both aspire in their own fashion to be an African version of Square, the U.S.-based POS company founded by Jack Dorsey that made it possible for micro-businesses to accept credit cards via a mobile POS terminal.
Yoco raised US$83 million in July, making it the biggest raise yet for a South African payments company. Yoco has raised a total of US$106 million since launching in 2013.
Both companies are focused on digitally enabling Africa’s SMMEs. And both plan to take their acts on the road to expand into other African markets. Paga has signaled its next stop is Ethiopia. Yoco has thus far been coy about where it will expand.
We imagine unicorn status — or in Paga’s instance pre-unicorn status — will be hailed as an important milestone for some time to come. However, at some point the novelty will wear off. As it already has in Europe and North America.