Unpacking The Untold Story Behind The Company That Is Set To Become Nigeria’s First Billion-Dollar Tech Firm

Getting Intimate With Interswitch

When Mitchell Elegbe had his card seized by an Automated Teller Machine (ATM) while trying to use one of those in Scotland back in the early 2000s, despair was the first feeling he felt — just as most people would.

But unlike most people, he managed to also help himself to a lightbulb moment in spite of the frustrating experience.

The encounter in Scotland may have turned out a small matter in the end but that singular experience set the ball rolling for what morphed into Interswitch; Africa’s leading digital payments providers which processed no less than USD 38 Bn in transaction value in 2017 alone.

Elegbe founded Interswitch in 2002 — only four years after he completed the mandatory one-year National Youth Service Corps (NYSC) programme in Nigeria. 

Seventeen years later, Interswitch is on the cusp of a billion-dollar-plus valuation following the news of global payments company, Visa, offering USD 200 Mn for a 20 percent stake in the company ahead of an Interswitch IPO in London planned for early next year.

That’s how far Elegbe’s Interswitch has come. And we are talking about the graduate of Electrical Engineering from the University of Benin (UNIBEN) who lost his father before he was born and who had to survive at the university by dubbing cassettes borrowed from friends and selling them.

If the deal with Visa goes according to plan, Interswitch will become Nigeria’s first billion-dollar internet company and arguably the first “truly African” tech unicorn.

And that’s because Jumia, the company which claims that title currently, isn’t exactly in everyone’s good books with regards to being African. We are talking about the first one-thousand-million-dollar company built by an actual African in Africa.

How Interswitch Came About

After graduating from UNIBEN, Elegbe “did” his national service at Computer Systems Associates (CSA) — a software implementation company connecting banks to the Society for Worldwide Interbank Financial Telecommunications (SWIFT).

After his service year, he got a job as a business developer at Telnet; an ICT engineering and consulting company operating in Nigeria.

Eventually, he moved to Scotland after landing a job with Schlumberger Wireline & Testing in Scotland, as a Field Engineer.

But his time at Schlumberger ultimately proved a short one. His days in Scotland became numbered after the run-in with the ATM machine that seized his card.

At this time, there were no ATM machines in Nigeria. Elegbe thought it would be nice to make ATMs available to solve the problem of the tiring “cash-is-king” financial transaction system which the entirety of the country clung to. 

The problem he encountered with the ATM in Scotland pushed him to conceive the idea to develop a payment system that would make electronic payments a reality in Nigeria.

And he was determined to bring that idea to life. Once he left Scotland and returned to Nigeria, he had one thing in mind — to help Nigeria “go cashless.”

Elegbe was rehired by Telnet communications after he returned to Nigeria. There, he pitched his electronic payment idea to his boss who liked it and gave him the go-ahead to execute.

But it was far from a smooth process. Getting the idea off the ground was tough. Determined not to give up, Elegbe started selling the software for the switching technology but most existing of the players were not that big on supporting his idea.

Then, he opted to do it himself. And that was how Interswitch came to be in the year 2002. Elegbe funded the company with support from Accenture at the early stages. The company’s current majority shareholder, Helios Investment Partners, only came on board in 2010.

Even though he didn’t know the first thing about running a company at the time, the baton fell on his lap by default and he had to lead Interswitch as CEO from the get-go.

Today, Interswitch builds and manages payment infrastructure as well as deliver innovative payment products and transactional services throughout the African continent.

The company has succeeded in changing the face of electronic payments in Nigeria.

Interswitch has also been strategic about its growth and expansion into other African countries by acquiring companies that fit into their future expansion goals. 

Some of the companies acquired by Interswitch in the last few years include East African payments provider, Paynet Group, Tanzania’s VANSO and Selcom, as well as Uganda’s Bankom.

But How Did Interswitch Get This Far?

Interswitch was birthed off of Elegbe’s observation. Prior to 2002, Nigerians were hauling cash around to pay for everything from groceries to houses and cars.

In those days, debit and credit cards were almost non-existent. POS machines were simply alien. Also, there was just a handful of ATMs here and there, and the machines available only served customers of a particular bank as Nigeria simply lacked the infrastructure for interbank connectivity.

All these caused endless queues of people in need of cash in banking halls while others simply skipped the difficulties by holding on to their cash. Elegbe spotted the dire need for a seamless digital payment system and meeting that need became his dream. Thus, Interswitch came to be.

The company built Nigeria’s first interbank transaction switching and payment processing infrastructure. This enabled interbank sharing and the first real-time POS system.

Interswitch uses a ‘switching’ infrastructure to connect the different banks in Nigeria and provides technology for ATM cards. The company has over 11,000 ATMs on its network.

Also, Interswitch launched Paydirect; a platform that proved a gamechanger in revenue collection for governments and large companies. Similarly, Webpay; its online payment gateway, laid down the groundwork for e-commerce in Nigeria.

The year 2008 is now a landmark year for Interswitch. That was the year the company launched Verve, which has become the most used payment card in Nigeria,  accounting for 18 million of the 25 million cards in circulation in the country. Verve has also been launched in Kenya.

Interswitch’s Verve cards have also gone global. In August 2019, Interswitch launched a partnership for Verve cardholders to make payments on Discover’s global network.

Oh you didn’t know? We Global now!

??? #WeChooseVerve #VerveGlobal #TimesSquare pic.twitter.com/ilm0TXfevr

— Verve Card (@VerveCard) August 12, 2019

The first transaction for the partnership was placed in New York, with an advertisement for the Nigerian company’s payment product flashing across the famous Times Square billboards.

In 2009, Interswitch introduced Quickteller; an online payments platform that can be accessed through a broad array of digital and physical channels. Quickteller currently boasts up to 15 million users.

More recently, Interswitch rolled out Paycode, which enables cardless transactions such as ATM withdrawals and POS payments by means of a digitally-generated token.

The company is also doing the most to facilitate “contactless” payments in Africa and is beefing up its systems to allow users to scan quick response barcodes from cellphones.

But it appears Elegbe’s company is just getting started. A solid five-year strategy was unveiled in 2017 and the target is to broaden Interswitch’s service offering to both customers and businesses, as well as to expand across Africa.

Interestingly, the Nigerian company — which has undoubtedly outgrown the startup phase — has expanded with a physical presence in Uganda, Gambia, and Kenya. Interswitch also currently sells its products in at least 23 African countries, through bank partnerships, and has a presence abroad.

The Only Way To Go From Here Is “Up”

Interswitch has grown to over NGN 30.8 Bn (USD 85.16 Mn) revenue, as of March 2015 year-end, with 93 percent recurring revenue.

Today, Nigerian consumers and businesses make more than 300 million digital transactions every month via a suite of channels enabled by Interswitch. With such numbers, it’s hard not to see one of Africa’s earliest tech companies growing even bigger.

And with an IPO on the London Stock Exchange (LSE) on the cards, Interswitch’s stratospheric ascent is set to continue.

Talks of an Interswitch IPO was first mooted in 2016 when Elegbe confirmed that “a dual-listing on the London and Lagos stock exchange is an option on the table.”

Sources even hinted at the listing happening by the end of 2016. But that didn’t quite happen and the company has been tight-lipped about the matter since then.

But the IPO talk was reignited in July this year when it was reported that the firm had hired investment banks to go public on the LSE later in 2019.

While there has neither been an official confirmation nor a denial from Interswitch on the matter, there is a strong indication that the seemingly long-overdue IPO is happening sometime in the first quarter of next year.

And the news of Visa forking out USD 200 Mn for a 20 percent stake in Interswitch does seem like the stance before the big leap.