Fintech holding company Crossfin Technology Holdings has announced a partnership with global fund manager Apis Partners to create an enlarged payments operating company that wants to transform the payments acceptance market in sub-Saharan Africa.
Apis Growth Fund I, a private equity fund managed by Apis Partners, has partnered with Crossfin through an investment in the new entity, called Crossfin Apis Transaction Solutions (Cats). Both partners will provide “significant capital support” to drive “customer-focused solutions in the merchant-acquiring space”.
As part of the initial platform, Crossfin will contribute its interest in iKhokha in South Africa and in Innervation Pan-African Payments.
Innervation is a pan-African payment and switching business providing payment, card issuing and value-added services to retailers; iKhokha is a provider of low-cost card payment acceptance devices aimed at small businesses and informal traders that has recently established a retail footprint through a partnership with retail giant Massmart.
Together, Innervation and iKhokha are present in about 25 000 till points and at 14 000 merchants in South Africa.
Crossfin’s portfolio companies process about US$4-billion in point-of-sale transactions and $500-million in mobile transactions annually across 9 000 retail stores with 90 000 point-of-sale lanes in seven African countries. Apis Partners and Crossfin want to use the initial platform of iKhokha and Innervation as a base for consolidation in the payments acceptance market in Southern Africa and later elsewhere in Africa.
South Africa has more than 1.5 million sellers (excluding unregistered informal traders), Crossfin said in a statement. The small and medium enterprise sector contributes nearly half of the country’s GDP and is expected to account for 90% of all new jobs created by 2030, according to the National Development Plan. However, there is a “significant disconnect” between merchants and electronic payment providers, evident in the fact that, while three-quarters of South African adults — 27 million people in total — have bank cards, a mere 6% of merchants accept electronic payments.
High bank fees
“Through market research conducted by iKhokha, we have identified that the main contributors to this shortfall are high bank fees, expensive hardware, slow application times and high decline rates,” said Crossfin chief operating officer Anton Gaylard in the statement. The consortium wants to address this shortfall “by providing electronic payment solutions that don’t carry the high fees inherent to the industry, easing the way to broader adoption by merchants in both the formal and informal sectors”, he said.
“We see the partnership between Apis and Crossfin as a very positive development for both ourselves and the other portfolio businesses,” said iKhokha CEO Matt Putman. “Access to significant capital support will allow us to rapidly accelerate iKhokha’s growth in both customer acquisition and product set. The partnership will also enable us to plug into Apis’s global network and leverage its extensive international market knowledge.”
Apis Partners managing partner Matteo Stefanel said the company will work with Crossfin to “facilitate the ‘electronification’ of South Africa’s payments industry”.
“By enabling the acceptance of all types of payments in a secure and safe manner, we aim to bridge the acceptance gap and reduce the significant shortfall in the amount of electronic payment acceptance devices in the country,” Stefanel said.
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