Crossfin Technology Holdings, a South African fintech investment firm, has been acquired by a consortium of investors, including Patrice Motsepe’s African Rainbow Capital (ARC), for R1.5-billion.
The consortium is led by Ethos’s Mid-Market Fund I and includes the founding Crossfin executive management team, EMMF I co-investors Ethos Artificial Intelligence Fund I, and empowerment investor ARC. Fairview Partners acted as financial advisors for the transaction, which will see the exit of founding investors Capital Eye Investments and the Multiply Group.
“The transaction is considered a landmark deal in the fintech industry and will see Crossfin secure the required capital to pursue the next phase of its growth,” Crossfin said in a statement on Wednesday.
“The transaction is one of the largest private equity-led investments in the fintech sector in South Africa to date and offers the consortium exposure to an industry that has and is expected to continue benefitting from, among others, the secular trends of digitalisation and proliferation of payments technologies.”
Crossfin operates mainly in South Africa and has a particular focus on payment technologies and smart funding. It has three main pillars:
- Payment technologies: It’s main investment here is Adumo, an independent, omnichannel payment-acquiring business in South Africa processing about 200 million payment transactions a year across 50 000 merchants. Adumo owns the well-known payments brand iKhokha. The segment also includes Crossgate Holdings, which specialises in card issuing for retailers, banks and non-bank financial institutions.
- Smart funding: Crossfin is an investor in Retail Capital, which uses transactional data to provide funding to small, medium and micro enterprises, a segment that is “underpenetrated by conventional financial institutions and where a significant funding gap exists”. Retail Capital’s business model is anchored around its “Low Touch Merchant Cash Advance” product, “leveraging its proprietary technology platform to analyse transactional payment data of merchants to determine repayment capabilities and to extend funding accordingly”.
- Venture capital: Crossfin Ventures (CV) is the venture capital arm of the Crossfin Group. “Despite being the smallest of the three current segments of Crossfin (estimated to be less than 5% of value), CV plays a critical role within the Crossfin ecosystem by allowing the company to gain early-stage exposure to emerging trends in the fintech industry,” Crossfin said.
In addition to these three segments, Crossfin is in the process of acquiring Sybrin, a “low-code and artificial intelligence-enabled enterprise software business targeting the financial sector with a focus on automation and the use of AI and machine learning to achieve efficiencies for its clients”.
The new investors will provide growth capital to allow Crossfin to invest organically and pursue new opportunities across South Africa and the rest of Africa.