Why Crossfin Technology is betting on mobile money in Africa
The company continues its acquisition trail.
African fintech holding company Crossfin Technology has been on a robust acquisition trail since 2018. It has acquired some big players in South Africa’s nascent but growing fintech industry, which refers to technology and innovation that aims to compete with traditional financial methods in the delivery of financial services.
Since 2018, Crossfin snapped up a majority stake in payments enablement firm Crossgate; concluded an investment in Retail Capital, a South African provider of alternative business funding to SMEs; a stake in insurtech start-up Nobuntu; and acquired card-payment solutions firm Sureswipe in partnership with private equity firm, Apis Growth Fund.
Now Crossfin – through its angel investment arm that incubates start-up businesses called Crossfin Ventures, which is in partnership with Investec Private Capital – has made a strategic investment into mobile wallet platform My-iMali. Crossfin didn’t disclose the amount of capital it injected into My-iMali.
Founded in 2018 by Casper Kruger and Matt Goosen, My-iMali has developed the BxChange E-Wallet App, an easy to use digital wallet that enables customers to make transfers to bank accounts, and top-up or purchase prepaid products and services.
The start-up provides lower-income consumers with the ability to transact anywhere in the world without paying any monthly fees, and gives businesses a more affordable, safe and convenient channel for salary disbursements.
Anton Gaylard (pictured), the co-founder and chief operating officer of Crossfin, said the deal forms part of Crossfin’s ongoing efforts to establish a cashless and more inclusive economy in South Africa and other key African markets. Crossfin’s portfolio companies currently process more than $4.4-billion in point of sale transactions and $500-million in mobile transactions annually across more than 9,000 retail stores with over 110,000 integrated point of sale lanes and 25,000 active merchants in seven African countries.
M&A Africa spoke to Anton about Crossfin backing My-iMali and its pipeline of investments, which will be concluded in the next few months.
M&A Africa: Why is Crossfin backing mobile payments in Africa through its investment in My-iMali?
Anton: I believe that getting more South Africans into formal but affordable banking services is key to unlocking greater economic value. A World Economic Forum study found that the use of cash cost South African consumers R23-billion in 2015 alone. The brunt of this impact is on low-income earners who forfeit as much as 4 percent of their earnings by using cash. We believe the answer lies in building a cashless economy on the back of innovative products and solutions to foster greater financial inclusion.
M&A Africa: What was appealing about My-iMali?
Anton: What I really liked about My-iMali is that the founders have been trying to create a mobile wallet solution for the lower-end of the market in the last three years and have come up with a product that actually works.
The way in which they are trying to grow the mobile wallet solution on the ground is a very practical approach. The founders and entrepreneurs behind My-iMali are actually learning about what works and doesn’t. It was the passion and appetite of the entrepreneurs linked to My-iMali that made us invest in the business. They have skin in the game, but they need someone to back them to get their product proven in the market and get a bit of growth.
M&A Africa: How does My-iMali fit within Crossfin’s fintech and payments focus?
Anton: We invest in mature, cash generative and profitable businesses. This is our mandate. We come across entrepreneurs and provide them with capital to grow their businesses substantially in South Africa and hopefully in the rest of Africa and other emerging markets. We are doing this with My-iMali.
In the past year, we have done transactions with Sureswipe, Retail Capital and Crossgate. These are significant businesses and we have growth strategies to back these guys. At the same time, we have a ventures unit called Crossfin Ventures, where we incubate start-ups. We like to do this because it helps us stay relevant and keeps us closer to the ground. We have been successful in the past incubating start-ups beyond proof of concept to mature businesses; these include wiGroup (a mobile loyalty software company) and iKhokha (a provider of low-cost card payment acceptance devices).
M&A Africa: Crossfin has concluded several acquisitions in a short space of time. What is behind the spate of acquisitions concluded?
Anton: We have been quite active in the last two and a half years. I think it’s because we have been in the market since the early 2000s. It was about getting the Crossfin structure right and then finding the right backers for our vision, which all fell into place over the last two years. And once we got that right we started executing on the pipeline of investments. We have a focus, vision and strategy. We still have a pipeline of investments and a long way to go. We will be concluding more deals through our traditional Crossfin mandate, which is investing in large and formal businesses alongside entrepreneurs.