One of Africa’s veteran fintech companies is about to become the sector’s first unicorn.

Global payments giant Visa is paying $200 million for 20% stake in Interswitch, Nigeria’s largest electronic payments company, UK’s Sky  News reports. 

The investment places a billion-dollar valuation on 17-year old Interswitch and is a major boon ahead of a proposed initial public offering slated for  the London Stock Exchange next year.

Interswitch declined to comment on news of the investment.

While Visa’s stake purchase would confirm Interswitch’s unicorn status, the company was reportedly set to be valued at as much as $1.5 billion ahead of a planned IPO next year. The company’s previous plans for a 2016 IPO were scrapped amid a recession in Nigeria. Interswitch would not be the first Africa-focused tech company to achieve the billion-dollar so-called unicorn status. Jumia, the e-commerce company, led by a mix of international executives and investors listed for over $1.4 billion in April.

The backing from Visa is the latest in a string of moves by global payments companies backing African fintech companies and seeking high-growth bets in emerging markets. The fundamental importance of the services that fintech companies provide—from powering payments, facilitating savings and ensuring financial inclusion for the unbanked to tackling access to credit for small businesses and individuals—underlines why the sector holds long-term appeal for investors. And, by most metrics, Interswitch represents significant value proposition given its established strength as an early-day and major player in financial technology with operations in over 20 African countries.

African fintech startups backed by global payments giants

PaystackVisa, Stripe (Aug. 2018)

FlutterwaveMastercard (Oct. 2018)

TalaPayPal (Oct. 2018)

BranchVisa (April 2019)

InterswitchVisa (Nov. 2019)

The company’s services range from powering online payment platforms and point-of-sale terminals to a debit card network with 19 million active cards. Given its sheer size, strength and lifespan, Interswitch is often thought of as part of the establishment, alongside traditional banks, that fintech startups might be looking to disrupt.

 In fact, numerous new entrant startups in online payments launched on the premise of providing alternative online payment platforms to Interswitch which was deemed inflexible and too expensive for merchants Visa’s investment in Interswitch changes the fintech landscape “significantly” and confirms the strategic interest of global payment giants in Africa’s financial services industry says, Victor Asemota, a veteran tech investor. 

“We were once talking about validation but we have moved way past that now to strategic positioning by major players. It is no longer a case of “let’s see where this is going.” It is now a case of jumping on the bandwagon.”

.Crucially, with Interswitch’s foothold in the market now significantly strengthened, Asemota says there could be a mirror effect with the company possibly eyeing acquisitions of promising local fintech startups. 

”Interswitch will be also wise to do the same ecosystem play Visa has made,” Asemota says.  “We need that big company which will become an exit path for others. Interswitch has now been positioned to do it.”

For its part, Interswitch has already signaled its appetite for acquisitions in African markets. Last week, it bought a majority stake in e-Clat Healthcare, a health-tech company. It also acquired VANSO, a financial services startup, in 2016 and acquired a majority stake in Paynet, an East Africa-focused payments provider two years earlier.