Zip seeks out growth opportunities in Africa with Payflex acquisition

The news: Buy now, pay later (BNPL) provider Zip acquired South Africa-based BNPL startup Payflex in a deal with undisclosed terms, according to a press release. Payflex, which launched in 2019, has more than 1,000 merchants and roughly 135,000 customers.

Why it's worth watching: We previously called out Africa as a region that remains largely untapped by global BNPL players—giving Zip plenty of room to grow.

As Klarna and other major providers expand their presence in Western markets like the UK and US, Zip is taking advantage of the growth potential and the limited presence of major BNPL players in Africa. The Payflex acquisition also reflects Zip’s growth tactic—expanding via acquisitions instead of direct moves into new markets: In May, Zip acquired United Arab Emirates-based BNPL firm Spotii and Czech Republic-based provider Twisto.

The opportunity: Zip’s Payflex acquisition might be a catalyst for further expansion into Africa.

• Pockets of unbanked and underbanked communities in South Africa and other African countries could benefit from point of sale (POS) financing like BNPL since these offerings also act as alternative credit solutions. It’s also a region that has strong growth potential: In the Middle East and Africa, POS financing solutions accounted for 4.8% of all POS transactions last year, according to The 2021 Global Payments Report by Worldpay from FIS.
• Working with a local player gives Zip a head start expanding its solution in South Africa and boosting overall volume—in its fiscal 2021 (ended June 30, 2021), Zip’s total transaction volume surged 176% year over year (YoY) and hit $5.8 billion. Zip employed a similar tactic when it acquired Quadpay to penetrate the US market last year.
• Zip could use a successful launch in South Africa as a blueprint for expansion in other African countries, like Nigeria, which has one of the largest economies on the continent. And for Payflex, the acquisition can expand its presence outside of South Africa since Zip has the capital and resources to bring it into other countries.

Related content: Interested in learning more about current and future BNPL potential in global markets? Check out our data deep dive, where we explore BNPL growth opportunities and threats and what they mean for industry stakeholders.