Flutterwave eyes Egypt’s cross-border payments market as it plans IPO

As Flutterwave moves to capture a share of Egypt’s cross-border remittances, the payment company hopes expanding and deepening its market coverage will also be a boost for its IPO appeal.

Flutterwave’s acquisition of a licence to payment services in Egypt may be linked to IPO plans which involve expanding its presence in major African economies. It already facilitates payment collection for an array of merchants in Egypt including Uber, but the company hopes it can tap into Egypt’s massive remittance market to deepen its market reach in the north African country. At the time it announced its Egyptian licence, Aalaa Gamal, regional manager of Flutterwave’s North Africa expansion and partnerships team in Egypt said the licensing represented the beginning of “other strategic wins in the North Africa and Middle East regions.”

Recall that in August 2022, Bloomberg reported that Flutterwave was moving ahead with its IPO plans in spite of the furore generated over accusations of financial impropriety in Kenya. Flutterwave CEO Olugbenga Agboola confirmed to TechCabal that his company is still planning its Nasdaq listing.

“Obviously we have a plan to do that [IPO], Agboola said, “But currently, our goal is to deepen market penetration, get our customers where they want to be across the continent [and] scale the business. But we’re getting IPO ready as a company,” he added “The market has been slumping for a while, so it is a wrong time to IPO,” Agboola acknowledged, but he added that he “saw that CAVA IPOed recently and their numbers went up, which is a good sign that the market is coming back. So it’s going back to where it should be,” Agboola said.

CAVA, a Mediterranean “fast-casual” restaurant chain was founded 13 years ago in Washington DC. It announced an initial public offering on June 15, sending the company’s valuation to $4.7 billion on its stock market debut—twice the initial target of the IPO promoters. It was widely viewed as a sign that the IPO window may not be so closed off after a series of failed stock market debuts (especially from SPACed companies) in the last two years.

As Flutterwave prepares to IPO, Agboola says his company will not seek to raise additional capital at this time. This is broadly in line with expectations for the company which has raised $474.5 million in funding over 11 rounds, with the latest being a $250 million series that put its valuation at $3 billion in early 2022.

In an exclusive with TechCabal and Semafor, the Flutterwave co-founder and CEO downplayed the suggestion that the decision to not seek additional funding has anything to do with the current state of the fundraising landscape. “We’ve run a thrifty business, compared to our size, so we’re in a good place, balance-sheet-wise,” Agboola said. “We don’t need to raise capital.” Flutterwave has been on a hiring spree, snapping talent for its executive team from Visa, American Express and Mastercard as it prepares for an eventual IPO. Agboola proudly reeled off a list of executive hires that the payment company made, including its new CFO, Oneal Bhambani, a former American Express executive.

Part of buttering up Flutterwave’s IPO appeal involves deepening its market penetration by looking north of the Sahara to Egypt, Africa’s third-largest economy.

Eyes on Egypt’s cross-border payment market

“There is a massive remittance corridor between Europe, the Middle East and Egypt,” Agboola pointed out. “We want to capture that corridor.” Beyond remittances, though, Flutterwave’s CEO noted that Egypt has “many different sectors [for payments], and it’s such a big market that we can’t afford not to play in that market.”

Remittances make up a huge percentage of Egypt’s foreign currency receipts. In 2021, earnings sent from abroad far outstripped what came into Egypt as FDI combined with income from the Suez Canal. 2022 recorded a slight decline in remittance-inflow into Egypt. The World Bank says it expects a recovery that will surpass 2021’s record remittance inflow. The bulk of these remittances come from Gulf Cooperation Countries and Western Europe.

Egypt’s government is counting on an increase in remittance inflow to help it tide over a growing foreign exchange crisis that has tanked the country’s reserves and forced it to sell state assets as part of an economic overhaul and negotiations with the International Monetary Fund (IMF). Egypt’s payments landscape is still dominated by banks which also process most of what is received from remittances. But it is conceivable that the informal (Hawala) system still plays a significant role in transferring foreign currency in the country.

Both the government and private financial institutions are paying a lot more attention to the remittance economy. Earlier this month, Emirates NBD – Egypt, a leading banking group with operations in the Middle East, North Africa and Turkey announced a partnership with the Arab payment system Buna to facilitate payments and transfers within the Arab region. Buna is operated by the Arab Regional Payments, Clearing and Settlement Organisation (ARPCSO), a subsidiary of the Arab Monetary Fund (AMF).

Since Egypt is predominantly on the receiving side of remittances, to effectively capture a share of the market might mean that Flutterwave laterally expands into the Middle or at least partners with a company that has visibility on the send side. That is the approach of Egypt’s homegrown Fawry, which has partnered with UAE-based voice-calling app Botim to allow Egyptian workers residing in the UAE to pay bills and send home remittances.