Inside Paystack’s local play

What’s it like running a Nigerian payments business in South Africa? Not without its challenges. But not impossible either. 

Since launching in 2021, Nigerian-born payments leader Paystack has quietly amassed “thousands” of South African clients, including Cape Town start-ups, mid-sized retailers and a growing roster of e-commerce brands. It’s the kind of success quietly proving that the Nigerian group is becoming established in a blisteringly competitive field of local alternatives. How did it do that?

Partly by teaming up with one of the global leaders. Fintech start-up Paystack was bought out for $200m by international payments company Stripe in 2020. Since then, it has spread its wings across the continent, including in South Africa, where it is small but growing. It also operates in Ghana, Kenya and Côte d’Ivoire, with local teams on the ground in key markets like Cape Town and Joburg.

South African CEO Joel Bronkowski leads Paystack’s charge in South Africa, where it competes to varying degrees against a bewildering array of tech start-ups, telecoms companies and banks. The recognition that this is a viable sector is clear to all, but winning in this space is hard, and different players are approaching it in different ways. Paystack is one of them, and it offers a comprehensive suite of payment processing services, in loosely the same space as Yoco, PayFast, Peach Payments and SnapScan. 

It’s the clear leader in Nigeria, though one of many in South Africa. But Bronkowski says the local business is going “really well”. Paystack has won a series of local clients, like accounting firm Xero and transport company Intercape. It turns out, if you are a Nigerian payments company, South Africans don’t always immediately resort to the most convenient national stereotype. 

But Bronkowski, who is American born, says lots of South Africans are actually curious about Lagos, as Nigerians are curious about Cape Town. Paystack has acted as an intermediary for some of South Africa’s tech start-ups and vice versa. That mindset, he hopes, can rewrite how African fintech scales across its borders.

He admits the heritage is “something that needs sensitivity here – South Africans want local, so our pitch is about partnership, not dominance”. 

Developing the business in South Africa has been like jumping off lily pads: once you win a new client, it becomes possible to jump to the next one in the same ecosystem, and so on. 

Managing complexity

Payment platforms compete with banks, but what they offer is multiple payment channels, so businesses can accept secure payments from credit and debit cards, mobile money, bank transfers, QR codes, Apple Pay and point of sale (POS) terminals.

Increasingly, the security aspects of this process and the payment functionalities are crucial. That includes something called USSD (unstructured supplementary service data), which is a messaging protocol used in cellular networks for sending and receiving short text messages between a user’s mobile phone and a software application, often on the mobile network. It allows for real-time, interactive communication, particularly useful for services like mobile banking or accessing information. 

Banks and mobile service operators can and do provide many of these services within their own ecosystem, but payment platforms have some additional advantages, including being multi-channel. All players compete on providing developer-friendly application programming interfaces, which provide different software applications with the ability to communicate and exchange data.

The players also all compete on price, and one of the big challenges for the sector is the possibility of a latent race for the bottom. Bronkowski says all players need to be cautious on price to ensure advanced fraud detection. But beyond price, merchants really care about “uptime” – the proportion of any given period that all operations are functioning, he says. 

Like South Africa, Nigeria still tangles with exchange rate fractures and local regulatory unpredictability, he says. “We face similar challenges there – the beauty of being a Nigerian brand is that it lets Paystack package South African complexity into a product rather than seeing it as an obstacle.”

_{Top image: Rawpixel / Currency collages.}