FRI 08 APRIL, 2022-theGBJournal| San Francisco and Lagos-based Flutterwave recently closed its Series D fund raise, raising $250mn in equity at a valuation that exceeds $3bn, a year after its $170mn Series C raise. The round was led by B Capital Group, with participation from Alta Park Capital, Whale Rock Capital, etc, and existing investors such as Avenir Growth, Tiger Global, etc.
“We’re becoming what we wanted to be: the infrastructure for any kind of payments, there’s no sector you look at today in Africa that you wouldn’t see Flutterwave taking a piece of that and enabling merchants and consumers to grow and scale. We want to change our focus from just Africa to emerging markets and eventually the US, the UK, Europe. Our goal is to ensure that our infrastructure powers those corridors,” said Olugbenga Agboola, CEO and Co-Founder of Flutterwave.
Although electronic payment transactions in Africa are growing multiple times faster, over 90% of domestic payment transactions are still done with cash. The ecosystem is highly fragmented with multiple issuing (card, mobile), acquiring (POS, QR, mobile) and store of value (bank accounts, wallets) solutions across different countries which are often non inter-operable.
Primarily an online acquirer, Flutterwave’s infrastructure enables businesses/individuals to collect or make digital payments domestically and cross border.
In this note, Renaissance Capital, assess the business and revenue model and monetisation pathways by taking a cue from leading global acquirers.
Business model
Who: Its ecosystem includes – issuers (banks, telcos, SMEs/corporates that provide a means of making payments digitally from a store of value); acquirers (banks, telcos, fintechs that provide a means of collecting payments digitally); merchants (SMEs/corporates who want to collect or make digital payments); individuals (who want to make/receive digital payments), developers/fintechs (who leverage its APIs and infrastructure to build their payment solutions), and credit providers (like banks or digital lenders to fund its merchants).
What: It was founded in 2016 to allow merchants to leverage its platform for domestic online payments in Nigeria. Since then, it has expanded across Africa, providing a range of digital payment solutions for its merchants while aiming to connect Africa to the rest of the world.
How: To use its solutions, merchants can either contact a salesperson for onboarding or sign up via its website, providing their business name, bank verification number (BVN), a valid ID, contact and bank details, etc.
Revenue model
The company claims to currently serve ~900k businesses globally and processes >500k transactions daily. To date, it also claims to have processed c. 200mn transactions worth >$16bn across Africa. It monetises via take rates (1.4%-4%), fixed fees, FX spreads, transfer commissions, lending, etc.
Future plans
Use of funds: 1) to develop and scale some of its new products, as announced during its Flutterwave 3.0 event; 2) accelerate customer acquisition in existing markets; 3) pursue strategic M&A. The company is already active in M&A while investing (directly or indirectly) in start-ups that are tangential to its business. As consumer behaviour changes post COVID and to capture a larger share of the profit pool, we are seeing global and African online acquirers build solutions that straddle offline, and we expect this to feature in Flutterwave’s plans.
Investor commentary
Matt Levinson, Partner B Capital Group said “We seek to back generational companies with broad platform potential. Flutterwave has a unique opportunity to accomplish this as the dominant payment infrastructure provider across Africa.”
“We believe the digitisation of payments globally is one of the largest and most important trends in technology. Having been investors in Flutterwave since 2017, we have had a front row seat in seeing Flutterwave establish itself as a leading payments company in Africa as it drives adoption of seamless digital payments experiences for merchants and consumers alike,” David Glynn, Managing Partner, Glynn Capital.
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