terrapay_fintech

L to R - Philip C Daniel, Acting CEO Instant Cash and Ambar Sur Founder & CEO TerraPay (PRNewsfoto/TerraPay)

TerraPay, a mobile payments switching company operational in Africa, Asia and Europe, has been acquired by a consortium of investors.

Investors involved in the acquisition include Prime Ventures, a Europe-focused venture capital firm, and Partech Africa, an investor in African tech startups. The acquisition is the next process in Terrapay’s development after completing 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. TechCabal reached out to at least two parties to understand the value of the deal and ownership stakes but we have been told those facts will remain undisclosed.

Prime Ventures, Partech and the IFC hold the controlling stake, while TerraPay key management also have significant stake, a TerraPay spokesperson told TechCabal. A $9.6 million investment by the lead investors has also been announced as a follow up to the acquisition.

Infrastructure for moving money

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.

“We believe in our mission to address financial inclusion by making real time national, regional and global payments accessible to everyone,” said Ambar Sur, Chief Executive Officer of TerraPay.

“We are excited by this validation from our marquee investors, and look forward to growing rapidly and reaching most of the world’s underserved in the coming years.”

Reducing the cost of remittance

TerraPay’s value add 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.

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.

Expanding IFC presence in Africa

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.

An African tech success story?

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.

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.

[Read: Why Partech Africa has set its sights on Africa’s informal economy]

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