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China-Backed African Payment Startup OPay is in Talks to Raise $400m to Facilitate Expansion

OPay, an African digital payment startup is in talks with investors to raise as much as $400 million at a valuation of more than $1.5 billion, three times its most recent valuation. Two people familiar with the matter told Theinformation.

OPay started in 2018 in Nigeria and expanded into Egypt earlier this year. Its new fundraising talks come as Chinese investors, confronting a more hostile political climate in the U.S., are increasingly looking at other countries including in Latin America, the Middle East and Africa.

OPay’s founder and CEO Zhou Yahui, an entrepreneur who earlier in his career founded online videogame company Beijing Kunlun Tech, first got exposure to Africa after leading a Chinese consortium to buy Norwegian web browser maker Opera five years ago. Opera had a presence in Africa with its mobile browser and other businesses. Zhou became chairman and CEO of Opera.

In the same year, he led the Opera deal, Zhou bought Grindr and San Francisco-based online video startup StarMaker, which has morphed into a karaoke app with more than 50 million active users, mainly in Southeast Asia and India. After the U.S. government forced him to sell Grindr, citing national security concerns, Zhou doubled down on his bet on Africa’s fintech market.

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OPay is a crucial part of Zhou’s global ambitions, people familiar with his thinking say. Over the past few years, Zhou has spent a lot of time in Africa and some of Kunlun’s managers have relocated to Nigeria.

Even though OPay’s business is in Africa, most of its backers are in China. Its existing investors include Chinese on-demand services app Meituan, as well as prominent Chinese VC firms such as Source Code Capital, Sequoia Capital China, IDG Capital, Gaorong Capital, GSR Ventures, Redpoint China and Bertelsmann Asia Investments.

SoftBank Ventures Asia, a VC arm of SoftBank, also is an investor in OPay. OPay’s most recent funding round was in November 2019, when it raised $120 million from Meituan and Chinese VC firms. That round valued OPay at $500 million, according to the people.

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Last year, OPay faced major setbacks as the coronavirus pandemic forced it to shut down its ride-hailing and logistics services in Nigeria. But even as OPay’s attempt to build a one-stop platform for various on-demand services fell apart, its mainstay payment business thrived.

OPay’s monthly digital payment transactions grew 4.5 times during 2020 to more than $2 billion in December, according to the company. In March, the company announced plans to launch debit card and credit card features.

OPay faces tough competition. Africa is a major fintech battleground thanks to so-called “mobile money” services, digital payment services that don’t require bank accounts for transactions.

Africa last year had 161 million active users of mobile money services generating $495 billion in total transaction value, up 23% from 2019, according to an estimate from telecom industry organization GSMA.

Major telecom operators like Orange, Vodafone, South Africa’s MTN and Airtel Africa are beefing up their mobile money services in Africa, while fintech companies like OPay also are trying to grab a bigger piece of the growing market. Nigeria, OPay’s main market, already is home to more than 200 fintech companies, according to a report last year by McKinsey.

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Such mobile money services were developed to function on simple feature phones more than a decade ago. But the arrival of cheap Chinese smartphone manufacturers such as Transsion Holdings, which is the dominant brand in Africa, has transformed the market.

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