Much has been said about the potential for economic growth across Africa with a great number of startups, multinationals and investors descending on the continent in search of opportunities. However, for Africa to reach its full potential it needs infrastructure and an ecosystem that allows businesses to thrive. A critical part of this infrastructure in the digital age is technology that gives businesses the ability to accept electronic payments such as mobile money, credit cards, virtual cards, instant bank transfers and QR codes seamlessly. This has become even more crucial as society moves away from cash; with Africa in particular leading the way globally in the adoption of mobile money resulting in unprecedented levels of financial inclusion in historically under-served communities.
Powering this digital commerce across Africa is DPO Group, a home-grown Kenyan technology champion headquartered in Nairobi, that has spent the last 14 years quietly building and scaling electronic payment solutions now used by 50,000 merchants across Africa and growing revenues at a rapid pace of 40% per year between 2017 and 2019. This week, in a strong boost to the African tech scene, DPO Group announced that it would be acquired by the multi-billion dollar London Stock Exchange listed payments company, Network International, for $288 million. This represents one of the largest African tech company acquisitions and possibly the largest in African online payments and gives us a good opportunity to investigate the factors that contributed to DPO’s success and what other companies can emulate.
The idea for DPO was conceived when DPO’s Co-founder and CEO Eran Feinstein visited Kenya in 2006 where he was approached by a Kenyan airline that needed him to build software for processing online bookings and credit payments from overseas visitors. At the time, internet adoption was still very low and most African companies didn’t offer online payments. So, Feinstein seeing an opportunity to provide a unique and valuable service and anticipating the exponential growth of digital commerce, moved from his homeland of Israel to Nairobi to launch DPO and has been permanently based there ever since. From small beginnings with a handful of clients and only 6 employees as recently as 2016, DPO Group is now an African payments juggernaut processing $2 billion worth of transactions annually and operating across 19 countries with over 300 employees; all of whom were hired locally in the African countries DPO operates in. This means that DPO has grown the number of people it employs across Africa an astonishing twentyfold in less than 4 years. The company now counts global blue-chip brands such as Uber, DHL, KFC, Expedia and Booking.com as clients.
Unlike many other technology companies that have tried to replicate products and services from international markets in Africa, Feinstein and the team at DPO recognised early on that they needed to understand and respect the cultural differences that exist across Africa markets and build products and local teams suited to each market. This has led to the development of truly innovative products like the DPO Dumacard, a virtual card that among others things solves the problem of many African consumers who cannot use their mobile money e-wallets, e.g. M-Pesa, to pay for products on online consumer platforms such as Amazon and Netflix. The Dumacard has enormous potential to empower millions of African consumers to shop online and accelerate their inclusion into the global financial and digital ecosystem.
DPO’s relationship with Uber is a good example of DPO operating across multiple countries, in this case Kenya, Tanzania, Uganda and Ghana, to deliver unique solutions. Uber lacked a single integrated system to collect cash payments from drivers, which resulted in lost earnings. DPO provided Uber with an automated solution through which it could invoice its drivers and collect its commissions via mobile money payments. DPO was best placed to provide this type of solution given its ability to process mobile money payments in multiple countries and currencies which allowed Uber to focus on its core business without having to integrate with the various mobile money wallets in several countries. The relationship with KFC is another example of DPO allowing global brands to scale their operations in Africa. KFC was looking for a centralised online ordering system for its franchisees in South Africa and needed the ability to scale this solution quickly and easily across the rest of Africa. DPO was able to provide them with an online payment service that allows consumers to place and pay for orders at any KFC outlet using cards or instant bank transfers and also allowed KFC to expand into East Africa by enabling it to accept mobile money payments. DPO now processes payments for over 900 KFC outlets across Africa.
DPO is also seeing indications that Covid-19 has accelerated the structural shift away from cash to online payments. In McKinsey’s Africa consumer survey, over 30% of consumers said they were increasing their usage of online and mobile banking tools during the pandemic, and e-commerce adoption by SMEs in South Africa is expected to double, reaching 45 – 55% by 2025 compared to 37% in the United States and 68% in the United Kingdom. An example of this accelerated shift is the e-commerce store provided by DPO to Artcaffe, a merchant in Kenya. Artcaffe operates a coffee and bakery chain with around 16 outlets and had no online presence at the start of this year. In March, when Covid-19 started to impact businesses, DPO offered Artcaffe a solution with its ready to use e-commerce store and that also facilitates and processes electronic payments. DPO worked with Artcaffe to build not just an online store for their bakery chain but a much larger food ordering marketplace, where Artcaffe now sells products on behalf of some of its suppliers thereby giving them access to a larger market and helping them stay afloat during this difficult period for many offline businesses. This increased adoption of DPO’s electronic payments solutions during Covid-19 has led to DPO growing the total value of transactions it processes by an incredible 57% and 49% in May and June respectively compared to the same months last year before adjusting for currency fluctuations.
DPO’s growth really took off in 2016 when the company received a significant investment from London-based global growth equity investor and financial services specialist, Apis Partners, to fund its expansion across Africa. Both organisations shared the same vision that Africa, as one of the fastest growing and most under-penetrated markets for online payments in the world, presents a unique opportunity to build a large, world class business. Working in tandem with Apis Partners, DPO acquired and successfully integrated five companies in only 4 years, an impressive feat to accomplish anywhere in the world, all the while launching new products and entering new countries. In addition to being one of the leading pan-African online payments companies, DPO, supported by Apis Partners, became the dominant online payments processor in South Africa, the largest market for online payments in Africa, through a series of astute and well managed acquisitions in that market. This achievement proves that companies can drive significant growth through bold strategic acquisitions while based any country across Africa and do not need to be based in the global financial hubs in South Africa, Europe and elsewhere outside Africa in order to successfully execute acquisitions in major markets. DPO’s phenomenal growth and impact is testament to what can be achieved in Africa when visionary entrepreneurs work with like-minded investors who share their vision and understand the African market.
In a vote of confidence, Matteo Stefanel, Apis Partners’ Managing Partner said of Feinstein and his DPO Co-founder, Offer Gat, “Eran and Offer are outstanding and visionary entrepreneurs who have built DPO into a truly world class business in a very short period of time. They exemplify the type of dynamic management teams Apis looks to invest in, and we are very proud to have worked with them and to have been part of the DPO journey. As they embark on the next phase of their journey as part of Network International, I am confident that Eran, Offer and the rest of the DPO team will continue leading the way in the African payments sector.”
While DPO has enjoyed great success, they have barely scratched the surface in terms of how large the African payment solutions space can become. The current size of the online payments market across Africa is around $800 million and expected to increase significantly to $6.9 billion by 2025. Following DPO’s acquisition by Network International, Feinstein and the DPO team intend to continue leading the way in African digital payments and delivering world-class solutions across the continent. When asked about the acquisition Feinstein said, “This deal represents a significant milestone for the pan-African payments landscape and the customers and businesses we serve. Combining the two companies will allow us to broaden our offering for new and existing customers, significantly improving capacity for Africa’s merchants to do business not only across the continent but in the Middle East as well as globally.”
It is rare that we see an acquisition and success story of this magnitude in African Tech so it’s imperative that we investigate the reasons behind it and try to replicate it. At its core, this is a story about a group of partners with a shared vision coming together to build a high-quality product and business specifically for Africa. I’m sure that as Africa continues to grow and digitise, DPO’s technology will remain a core part of the infrastructure facilitating financial transactions across the continent.