Network International has announced a 28% increase in year-on-year revenue for Q3 2022. Network is a leading enabler of digital commerce across the Middle East & Africa, focused on helping businesses and economies prosper by simplifying commerce and payments.
The company, which operates across Africa and the Middle East, has seen another quarter of financial and strategic delivery, underpinning full year expectations; Figures include positive licensing updates to access new revenue pools; A record period of new wins with four new financial institution, totaling 13 year-to-date. Also signed first credit processing agreement in South Africa; Direct-to-merchant TPV in Africa (DPO) increased 30% y/y in constant FX.
We continue to make positive strides in executing against our strategy, delivering yet another high growth quarter with 28% y/y revenue growth. During the period we won record levels of new business in the UAE and continued our market entry in Saudi Arabia. I am also thrilled to see Network leading the industry with positive licensing updates in the UAE, Egypt, Kenya and Saudi Arabia, whilst continuing to strengthen our relationship with major customer Emirates NBD. We face the future with excitement knowing we have several growth levers available, supported by the scale, capabilities, people and trusted brand to fulfill our purpose of helping the economies and customers we serve to grow and prosper.Nandan Mer, Chief Executive Officer
Network is a high growth payments business operating at scale across countries with large consumer spending pools, young populations and an accelerating secular shift from cash to digital payments. It is the largest acquirer delivering payment services directly to over 150,000 merchants in the UAE, Jordan, South Africa and a further 20 markets across Africa. It also manages over 17 million digital payment credentials for over 200 financial institutions in more than 50 countries. Whilst operating at scale, Network remains a local business with on-the-ground presence in over 20 markets.
Network’s growth-oriented strategy is focused on scaling existing markets, targeting new markets, expanding capabilities and diversifying revenue streams. Its focus markets in Africa remain Egypt, South Africa and Kenya. At its Capital Markets Day in September 2021, Network set out a new strategy to drive faster growth and has already delivered on a number of key commitments:
- Financial growth: on track to deliver 2022 financial guidance of 27-29%1 revenue growth and modest underlying EBITDA margin expansion; returning excess cash of up to USD 100m through a buyback.
- Acquisition of Africa direct-to-merchant business (DPO): has broadly doubled e-commerce revenue, added alternative payment capabilities and accelerated SME signings across the Group.
- Financial institution processing business: seeing record levels of revenue growth as a result of new customer wins, accelerated transaction growth and the cross-selling of value-added services.
- Further growth opportunities: launching direct-to-merchant services in Egypt and have successfully started to establish contract wins in the commercial payments processing space.
Several regulatory approvals in African key markets
Network welcomed the increasing regulatory frameworks being introduced across its markets, having recently received approvals to provide direct-to-merchant business in two markets:
- Kenya: Network has been authorised by the Central Bank of Kenya to act as a Payment Service Provider and continue providing payment gateway services in Kenya, with direct-to-merchant services by DPO.
- Egypt: Network has approval to operate as a payment facilitator and a payment service provider working through local Financial Institutions. It intends to launch direct-to-merchant payment services during the fourth quarter. (As a reminder, Network’s existing processing activities on behalf of financial institutions do not require a license).
Solid revenue growth is reflective of the large number of customers signed in the prior year and ongoing strength in the number of transactions, which has continued to grow throughout the year-to-date. Both the Middle East and Africa saw y/y growth in the number of credentials hosted and transactions processed, with performance in Africa being particularly strong.
Network secured four new financial institution customers during the quarter. It also expanded its relationship with Access Bank to support the launch of their credit card services in South Africa.
New capabilities include the launch of commercial payments services
- New business in commercial payments: Network has started to launch commercial card processing services with a number of wins in the space. The commercial payments landscape represents a potential new revenue pool and a cross-selling opportunity to existing customers.
- Payment installment by SMS: introduced for two existing financial institution customers.
- Partnership with Mastercard expands: having collaborated with Brighterion, Mastercard’s artificial intelligence arm, to provide fraud mitigating services which can identify anomalistic transaction behaviours and fraud monitoring.
Merchant Solutions business line review
Merchant Solutions revenue momentum in Africa
Africa (DPO Group): DPO saw TPV up 14% y/y or 30% in constant FX1, whilst revenue grew 16% y/y or 29% in constant FX1.Merchant signings have reached new record levels, supported by SME wins
New signings in Q3 reached record levels, above the rates seen in the first half of the year, with no significant customer losses. The pace of SME signings accelerated through the period, which has been supported through the recent launch of ‘DPO Pay’ services in the UAE and tap-on-phone signings, which allows a merchant to take payments through an app on their own mobile phone.
Enhancing capabilities and value-added-services
- Roll out of the WooCommerce plugin for SME merchants: creating an online store, shopping cart and checkout in 48 hours.
- Introduced online government payments in Namibia: through proprietary N-GeniusTM gateway in partnership with Standard Bank.
- Continued development of Unified Commerce services: enriching ‘Click & Collect’ services through the option to ‘Buy online and return in store’.
- Extended longstanding data analysis partnership: with one of the region’s leading retail and shopping facilities operators.
Network will soon be launching direct-to-merchant services in Egypt following approval of the relevant licenses by the Central Bank. As a reminder, Network is already a large-scale provider of processing services to financial institutions in the country. Direct-to-merchant services will be a new revenue opportunity which is expected to be built from 2023 and will be focused on SMEs and expanding existing relationships with large-scale customers in the region.
Network has extended its partnership with Tymebank to support the growth of the bank’s payment acceptance capabilities in South Africa through the roll-out of tap-on-phone payments; enabling its SME merchant customers to take payments using an app on their own mobile device. Similarly, Network has also further extended its acquirer processing offer through agreements with I&M Bank in Kenya and Access Bank in Ghana, expanding its acquirer processing services across Africa.