Nigerian digital banking platform FairMoney has acquired PayForce (a YC-backed sub-brand of CrowdForce), a merchant payment service that serves small businesses, as the digital lender seeks to expand its financial services proposition to merchants.
Both startups declined to disclose terms of the deal. However, according to sources, the deal was a cash and stock deal in the range of $15-20 million. As part of the deal, the CEO of CrowdForce Oluwatomi Ayorinde joins FairMoney, where he will lead the company’s payments business unit: PayForce by FairMoney.
Most African consumers and businesses remain financially underserved – and in Nigeria, where 64 million people, according to the World Bankare underbanked, there is a huge opportunity to provide access to financial services to both groups of customers.
While FairMoney has primarily operated a credit-focused neo-banking game targeting retail customers, CrowdForce, through payment strength, provides agency banking, a branchless banking model that extends financial services to the last mile through a network of human ATMs. However, multiple iterations, competition-driven innovation and raising venture capital have driven both companies to move from their flagships to a plethora of offerings as the digital retail and banking space business intensifies.
PayForce was launched by providing merchants with point-of-sale devices and enabling them to offer cash-out, withdrawal, transfer, and bill payments to retail customers while providing liquidity through a network of partners ( the company told TechCrunch last year that it has the largest liquidity among Nigerian banking agent networks, nearly ₦1.7 trillion). The fintech, which serves more than 10,000 businesses, has upgraded its product line to include business banking, finance team tools, B2B payments and virtual cards. It raised a pre-Series A of $3.6 million last February.
FairMoney, on the other hand, started with a digital loan product that covers 15-day to 24-month loans to mostly retail customers. The company, which secured a Series B of $42 million in 2021, now provides accounts and debit cards, P2P transfers and payments to more than one million retail and small business customers, who are become a big part of his business, CEO Laurin Hainy TechCrunch said on a call.
The acquisition, according to Hainy, will offer incentives to merchants acquired by PayForce who use FairMoney as their primary bank, such as an 18% annual return on deposits, a rate he claims consumers enjoy on the platform. He also said that FairMoney will design specific credit products for different business groups, tackling one of the biggest issues facing small businesses in Nigeria: access to loans and working capital. Plus, it’s not a stretch to think that FairMoney might be looking to bank some of the offline clients that CrowdForce has served over the years.
“We see ourselves as a retail bank, but the line between merchants and retail is often blurred. We’ve been thinking more and more about the merchant space, and we see a lot of potential synergies between what PayForce and we’ve built independently,” he added. “We know that if we combine the two businesses, their merchants will benefit from what our retail customers are already enjoying.”
As consumer digital banking startups such as FairMoney and Kuda dive into merchant banking, fintechs on the other side of the table, including OPay and Moniepoint, are acquiring retail customers. However, the transition has not been smooth for most of these players due to the varying banking needs of different customer profiles on a single application. As one of the dominant neo-retail banks, FairMoney hopes that PayForce – which Hainy says helps small businesses solve several problems and enables them to better understand their finances and generate more revenue through its “thoughtful” product – provides it with a much-needed merchant-driven value proposition that strengthens its position in the country’s corporate banking space.
“Our view is that PayForce has an advantage because their software is designed for the CFO and small business owners,” Hainy said, giving his opinion on competing in the acquired business space. “PayForce helps them make more money compared to many other competitors, which we think are branch banks, because they didn’t build the product with the merchant in mind; they build the product with the agent in mind There’s a huge difference, so we’re not worried about the competitive landscape there.
Indeed, FairMoney, through acquisition, wants to gain more market share and become the “number one” retail and business bank in Nigeria as Hainy puts it. The fintech intends to add credit cards, remittances, stocks and investment products for its retail customers – and include payroll services, BNPL and merchant acquiring in line in its suite of business products.
In addition to growing its stack, FairMoney is also actively engaging in several acquisition conversations. The Tiger Global-backed fintech is in talks to raise a bridge of more than $30 million from new and existing investors, money that will be used to complete these acquisitions (including those of PayForce) and expand operations in outside Nigeria and across Africa, according to sources familiar with the deal. . Hainy declined to comment.
Acquisitions have increased in Africa lately. According to this report, intra-country acquisitions increased from 31% in the second quarter to 52% in the third quarter of 2022, signaling a growing consolidation trend spurred by falling prices and a venture capital crisis. Despite these indications, basic exit opportunities could trigger a sell-off in current market conditions, as in the case of CrowdForce according to its former chief.
“There are many ways to win. To win, a startup needs a great product, strong execution, marketing, and funds. Investors mainly provide funds. This acquisition gives CrowdForce and its investors a combined value proposition to begin execution, earn and create value for all shareholders. In a fast-moving market like Nigeria, time and speed are of the essence,” Ayorinde replied when asked if Abuja-based CrowdForce had to sell because it encountered a difficult fundraising environment.