The World Bank’s private sector arm, International Finance Corporation (IFC) has joined a consortium of investors to acquire TerraPay, a mobile payments switching company that has operations in Africa, Asia and Europe in a $9.6million deal. The deal involves other investors such as Prime Ventures, a Europe-focused venture capital firm, and Partech Africa, an investor in African tech startups and will see the mobile payment switching firm move to the next level of its expansionist aspirations. Before now, TerraPay has been on an incubation period under Comviva, an Indian-based mobile solutions company.
The International Finance Corporation (IFC) and Terrapay’s management team are other key participants in the acquisition. Sources that are familiar with the deal say that Prime Ventures, Partech and the IFC hold the controlling stake, while TerraPay key management also have significant stake. TerraPay facilitates business-to-business transfers and settlements for financial services companies. Money transfer operators, banks and mobile money startups are their primary clients. The company was founded in 2015 and has acquired more than 25 licenses enabling its global operations in about 60 countries.
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Speaking on the development, Ambar Sur, Chief Executive Officer of TerraPay said that the company believes in its mission to address financial inclusion by making real time national, regional and global payments accessible to everyone, adding that “we are excited by this validation from our marquee investors, and look forward to growing rapidly and reaching most of the world’s under-served in the coming years.”
TerraPay’s value addition has been in reducing the cost of money transfers. Remittances are a significant contributor to the GDP of emerging markets. To cite one example, Nigeria received $17.57 billion in diaspora remittances in the twelve months of 2019. Remittances are a half-a-trillion dollar market globally. But it’s not all good news yet: the cost to send money to and fro averages around 9.3% in emerging markets compared to the global average of 7%. A number of factors, especially the cost of handling cash by senders and receivers, contribute to high cost of remittances in Africa.
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After starting in Ghana, TerraPay has obtained licenses in 15 African markets. They partner governments and money transfer operators to create central transfer protocols that reduce the cost of financial services transactions. TerraPay’s revised corporate structure and $9.6 million investment from the acquiring parties will see it expand to more countries. By this, TerraPay becomes the latest addition to the IFC’s portfolio of African fintechs. They join Nigeria’s Interswitch, Egypt’s Fawry as well as Lulalend, Net 1 and Zoona from South Africa.
It is in line with the organisation’s mission to help streamline money transfer processes for diasporans while increasing financial inclusion in emerging markets, according to Paulo de Bolle, IFC’s Global Director for Financial Institutions Group. The IFC focuses its fintech searchlight on late venture or growth stage tech-driven businesses with existing revenues demonstrating commercial viability. It’s tickets are between $3 million and $20 million for a minority equity position, or a minimum of $10 million in debt with equity features.
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TerraPay’s success over its five years of existence partly stems from partnerships with global money transfer companies. Western Union, Visa, Xpress Money, MoneyTrans, Paga, Ria, Instant Cash, Ripple and MoneyGram are among its partners. In December 2019, TerraPay partnered with UBA, a Nigerian bank, to offer real-time money transfer services to the bank’s 20 million customers. The service currently exists in Cameroon, Sierra Leone, Côte d’Ivoire, Ghana and Burkina Faso.
Cyril Collon, a general partner at Partech Africa, said his Africa-focused firm became interested in TerraPay as a result of the latter’s cutting-edge platform. He hopes TerraPay “will play a key role in reaching the interoperability goals necessary for true financial inclusion.” Based on its founding history of being incubated in India and incorporated in the Netherlands, TerraPay is not an African tech startup in the same breath as Kudi, Yoco, Trade depot or the other startups Partech Africa has invested in so far.
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However, they have “built a platform geared toward facilitating flow of money first in African and within Africa,” Collon said while making the case that they are an African tech company. “Most of its revenue is in Africa by servicing today already 2/3 of all African countries,” Collon said.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry