SAT 16 APRIL, 2022-theGBJournal | Operating in Nigeria, ZirooPay recently closed its Series A round, raising $11.4mn. The round was led by Zrosk Investment Management with participation from Fedha Capital and other investors.
As at late 2020, 13-15% of card transactions in Nigeria failed, vs 0.7% for Nigeria Interbank Settlement System (NIBSS) Instant Payment (NIP) transactions. According to NIBSS, about half of these card failures are attributable to system glitches and GPRS signal problems in the POS processing system.
ZirooPay claims to have created a patented solution – a mobile POS (mPOS) that, similar to Square’s reader, is connectable to an Android device via Bluetooth – that allows merchants to receive payments with or without internet. It also allows merchants to earn extra income from airtime sales, bank transfers, etc, while also providing them with value-added services such as sales tracker, etc.
Business model
Who: Its main stakeholders include: merchants, who typically use its POS terminals and mobile app to accept payments; financial services providers, eg, PTSPs, banks, etc., some of whom it either leverages their licences to deploy/distribute POS terminals to merchants or to provide value-add services to merchants.
What: Founded in 2019 as a subsidiary of IroFit, the company provides a mobile-based merchant offline payment acceptance solution that uses a mobile app and card reader.
How: Merchants typically fill an application form on ZirooPay’s website. Information provided during the process includes: business brief, location, monthly sales volume, etc. Following this, a ZirooPay representative contacts the merchant to complete the onboarding and assign a mPOS device to them, in addition to the mobile app available on Google Play Store.
Revenue model
ZirooPay claims to have processed c. 10mn transactions worth $500mn for its >15k merchants within three years, maintaining a 95% transaction success rate. It also claims that its processed value grew 5,000% over these years (off a low base). In addition to monetising from the merchant discount rate (MDR) as a POS owner, it also monetises through: 1) hardware sales to merchants, either outrightly for NGN15k or in part (where merchants pay a caution fee of NGN5k and are required to meet some monthly targets), margin on airtime sales, and fees on bank transfers and cash-out services.
Future plans
Funds from this raise would be used to: expand its payments infrastructure and grow its team, expand its product offerings, and increase existing payment options for merchants. We note that as is typical with offline acquirers to boost revenues and/or margins, ZirooPay may seek to acquire some licences that would enable it to capture more share of the MDR economics, for example, expanding from only a POS owner to securing a PTSP or switching/processing licence, or expand to countries with higher take rates.
Within emerging markets, Indian Mosambee is one of its close comps, and within Nigeria, Traction Apps, Kwiksell and Doroki are examples of some non-bank offline merchant acquirers.
Management and investor commentary
Omoniyi Olawale, Co-Founder and CEO of ZirooPay said, “think about everything that the cash registers seen in big supermarkets can do; with an Android application and a mobile point-of-sale card reader, we provide that same functionality to small businesses. We’ve been able to see over 70% of our users migrate from paper-based accounting to depend on the in-app sales accounting within three months of onboarding. No major company is coming in with modern technology trying to tackle this space and that’s one area that we see an opportunity for us because we are primarily a retail payment platform. Even though we provide agency banking on the side, our focus is on retail, and that’s something that differentiates us from the other players.”
According to Samson Esemuede, Managing Director and Chief Investment Officer, “ZirooPay has a patented technology advantage (that works without an internet connection) and distribution model that significantly increases the odds of digitising the offline economy at a unit cost that makes the story particularly compelling. The payment space has become well-resourced and competitive, but the white space we see in the digitisation of cash is the reason we are optimistic about the outlook for this investment.”- Coverage provided by Renaissance Capital
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