KEY POINTS

• Paystack has acquired and rebranded a microfinance bank to expand into lending and deposits.

• The move targets Nigeria’s estimated $32 billion financing gap for small businesses.

• Founder Shola Akinlade says data from payments will drive faster credit decisions.

Shola Akinlade, a Nigerian software engineer who helped start Paystack, is now leading the Stripe-owned payments company into banking. This is because small businesses in Africa’s largest economy have a hard time getting credit.

Paystack said it bought Ladder Microfinance Bank, which is now called Paystack Microfinance Bank. This move expands the company’s role beyond just processing payments. The company’s growth puts it in a good position to help fill Nigeria’s estimated $32 billion financing gap for small and medium-sized businesses, many of which have trouble getting loans from regular banks.

Paystack, which was started in 2015 by Akinlade and Ezra Olubi, is now an important part of Nigeria’s digital economy. It handles transactions for about 300,000 businesses. Up until now, its main job has been to help merchants accept and keep track of payments. The new banking arm lets the company take deposits and give out loans, which strengthens its relationship with customers.

Stripe owns both the microfinance bank and Paystack’s payments business, but they will run under different licenses and governance structures. Officials at the company say that the structure lets them grow carefully while staying within the law.

Data driven lending at the centre of strategy

Akinlade thinks that Paystack’s advantage is that it already processes a lot of transaction data. The bank wants to offer working capital loans, merchant cash advances, and overdrafts with shorter approval times than other lenders by looking at merchants’ payment histories.

Small businesses that are having trouble with cash flow need to be quick, especially in an economy where prices are going up and down. Paystack Microfinance Bank also wants to offer digital accounts and savings products through application programming interfaces (APIs). This will let other startups add financial services without having to get their own banking licenses.

The approach is similar to the developer-friendly strategy that helped Paystack get off to a good start by making it easier for Nigerian businesses to accept online payments.