• Tech - News - Startups
  • Updated: March 14, 2023

FairMoney Acquires PayForce In Retail-Merchant Banking Move

FairMoney Acquires PayForce In Retail-Merchant Banking Move

A Nigerian credit-driven digital banking platform, FairMoney has acquired PayForce, a small business-focused merchant payment service, as it seeks to diversify its offering of financial services to merchants. PayForce is a sub-brand of CrowdForce, which is financed by YC.

The deal's terms were kept secret by both firms.

Sources claim that the sale was actually a $15 million to $20 million cash and stock transaction.

Oluwatomi Ayorinde, the CEO of CrowdForce, joins FairMoney as part of the agreement and will serve as the head of the business division for payments called PayForce by FairMoney.

The majority of African consumers and businesses continue to be underserved financially, and Nigeria, where 64 million people are underbanked, has a significant opportunity to expand access to financial services for both groups of clients.

In contrast to FairMoney, which has mostly operated a credit-led neo-banking approach aimed at retail clients, CrowdForce offers agency banking services through PayForce, a branchless banking model that uses a network of people ATMs to deliver financial services to the last mile.

But as the digital retail and merchant banking markets grow more competitive, several iterations, competition-driven innovation, and obtaining venture funding have forced both organisations to shift from their main products to a wide range of offers.

PayForce began by giving retailers access to point-of-sale (POS) devices, enabling them to offer cash-in, cash-out, transfers, and bill payments to retail customers while supplying liquidity via a network of partners.

The fintech has expanded its product line to include business banking, finance team tools, B2B payments, and virtual cards.

It currently serves over 10,000 organisations.

In February of last year, it raised a $3.6 million pre-Series A.

FairMoney, on the other hand, began with a digital lending product that offers loans to primarily retail customers for terms of 15 days to 24 months.

CEO Laurin Hainy announced that the company, which obtained a $42 million Series B in 2021, now offers debit accounts and cards, P2P transfers, and payments to over a million retail consumers and small enterprises, which have grown to be a significant part of its business.

Hainy argues that the purchase will offer incentives to PayForce-acquired merchants that use FairMoney as their primary bank, such as an 18% annual return on deposits, a rate he claims retail customers are utilising on the platform.

He added that FairMoney would provide customised credit products for various business types, addressing one of the greatest issues small businesses in Nigeria face: access to working capital.

Furthermore, it is not absurd to believe that FairMoney may attempt to bank some of the offline clients CrowdForce has provided over the years.

“We see ourselves as a retail bank, but the line between merchants and retail is often blurry.

“We’ve thought about the merchant space more and more, and we see a lot of potential synergies between what PayForce and we have built independently,” he added.

“We know that if we combine both businesses, their merchants will enjoy what our retail customers already enjoy.”

Fintechs on the other side of the board, including OPay and Moniepoint, are gaining retail consumers as consumer digital banking firms like FairMoney and Kuda foray into commercial banking.

Because multiple client profiles on one app have varied banking demands, the shift has not been easy for most of these players.

FairMoney, one of the leading retail neobanks, will be relying on PayForce, which, in accordance with Hainy, assists small companies with a number of challenges and enables them to better understand their finances and generate more money through its “well thought-out” product — provides it a much-needed merchant-focused value proposition that bolsters its position in the country’s business banking space.

“Our view is that PayForce has an advantage because their software is built for the finance manager and small business owners,” said Hainy, giving his thoughts on competition in the acquiree’s space.

“PayForce helps them make more money versus a lot of the other competition, which we think are agency banking businesses as they did not build a product with the merchant in mind; they build the product with the agent in mind.

“There is a huge difference, so we’re not worried about the competitive landscape there.”

According to Hainy, FairMoney does intend to increase its market share and establish itself as Nigeria's "number one" merchant and retail bank as a result of the acquisition.

The fintech plans to expand its business-facing product suite to include payroll services, BNPL, and online merchant purchasing, as well as credit cards, remittance, stock, and investment products for its retail consumers.

FairMoney is actively having various acquisition negotiations while also expanding its stack.

In order to fund these acquisitions (including PayForce's) and expand operations outside of Nigeria and across Africa, the Tiger Global-backed fintech is in discussions to raise a $30 million+ bridge round from new and existing investors, according to sources familiar with the negotiations. Hainy opted not to respond.

Africa has recently seen an increase in acquisitions.

This research indicates that intra-country acquisitions increased from 31% in Q2 to 52% in Q3 2022, indicating an increase in consolidation driven by declining pricing and a lack of venture capital.

Notwithstanding these recommendations, a sale might still occur given the present market conditions, as CrowdForce's former CEO claimed to have happened.

“There are multiple ways to win. To win, a startup needs a great product, strong execution, marketing and funds. Investors mostly provide funds.

“This acquisition gives CrowdForce and her investors a combined value proposition to begin execution, win and create value for all shareholders.

“In a fast-paced market like Nigeria, time and speed is critical,” answered Ayorinde when asked if the Abuja-based CrowdForce had to sell because it met a challenging fundraising environment.

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