Probe on purchase of crossborder digital payment provider
South Africa is home to a vast remittances network, with billions of dollars sent to and from African markets every year.
Remittances represent an important flow of money in today’s globalised society as individuals work, study and live in different geographies compared with their families. Given this fact, a number of digital payments service providers have entered the market in an attempt to make it easier for these person-to-person payments to take place across borders.
A pan-African commercial bank was interested in entering the market for digital remittances in Africa through the purchase of a digital payment provider, with the intention of streamlining crossborder remittance payments both across its own customer base and for non-customers. Beyond this, the digital services provider also offered a number of other payment services, such as bulk payment and e-commerce acquiring.
The bank partnered with Genesis to assess the revenue potential of this acquisition to make a decision on whether to proceed with the transaction.
The Genesis team assessed the revenue opportunities across digital remittances in Africa, taking into account transaction fees, foreign-exchange fees, the size of the various remittance corridors in Africa and the competitive landscape, as well as the prospects for the target company’s other payments services.
The team identified a number of opportunities for the bank to consider as part of its remittance disruption strategy, with current and future revenue projections for these, and presented these to the bank. Given the results of the analysis, the bank opted not to proceed with the acquisition, but used the insights in the remittances market across Africa to inform its own strategy.