As UAE-based Network International announces plans for a hotly anticipated IPO, CEO Simon Haslam says the Middle East and Africa are about to catch up to the rest of the world when it comes to cashless payments
Network International is probably a company that you’ve never heard of or thought about. But chances are that you use its payment processing facilities every day – perhaps multiple times. Every time you use your credit card, tap the terminal to make a payment, or use an ATM, it is more than likely thanks to Network International. Even while the payments company goes largely unnoticed by us – the consumers – it is everywhere.
A glance at its numbers is staggering. The company processed 681 million transactions worth $40 billion last year. Each transaction is processed in less than a second, with a small portion of the value going to the firm. Network International also processes nearly 75 percent of all transactions in the UAE and a significant majority in Jordan, two of its largest markets. It also boasts 50 percent of the acquirer market in the UAE.
This is the last region in the world that has yet to undergo that shift [from cash to digital payments]
Network International is present in over 50 countries across the Middle East and Africa, with a customer base of over 65,000 merchants and 220 financial institutions.
Business is good – as highlighted last week by an announcement that the company, jointly owned by Emirates NBD and private equity firms Warburg Pincus and General Atlantic, is considering a London IPO.
If Network International goes ahead with the plan – which would see it undertake a reorganisation of its structure, governance and internal contractual arrangements - the company will float at least 25 percent of its issued share capital. That is likely to make it eligible for inclusion in FTSE UK Indices.
“Considering the global nature of our business, London was our first option given its mature and developed fintech and payments sector,” Network International’s soft -spoken but candid CEO, Simon Haslam, tells Arabian Business. “In addition, London has one of the world’s deepest pools of capital, access to a wide investor base and a balanced and respected framework of regulation and corporate governance.”
Network International’s announcement, however, comes at a time of uncertainty in the UK as the country rapidly approaches Brexit, and a departure from the European Union. (The original Brexit date, March 29, is now in doubt as Britain ponders asking for an extension).
Haslam – a 35-year veteran of the payments industry who was previously the president and chief executive of the Atlanta-based payment processor Elavon – says that in Network International’s case, there is no need to panic.
Our business operates outside the European Union so would not be impacted directly by the UK’s relationship with the UAE
“Naturally, we will keep a close eye on market developments and will see how things unfold over the coming weeks and months,” he explains. “However, our business operates outside the European Union so would not be impacted directly by the UK’s relationship with the UAE.”
Haslam’s optimism about the future and Network International’s enormous growth over the years can be explained by one simple fact: most people in MEA still prefer to use cash. In the UAE, for example, estimates suggest that 75 percent of all transactions still take place using notes and coins. Even for e-commerce, cash on delivery remains the most used payment method. Across the wider region and Africa, a whopping 85 percent of transactions are still conducted in cash.
Slowly but surely, this is all changing – and that’s where Network International comes in.
“We continue to grow both volume and transactions,” Haslam says proudly, forcing a smile even while visibly jet lagged after weeks of flying back and forth to London. “If you look at my transaction growth, it’s grown at 33 percent CAGR [compound annual growth rate] over the last 10 years. My volume is 15 percent CAGR over the last 10 years. We’ll continue to grow as people move more from cash payments to card payments.”
As Haslam tells it, the Middle East and Africa are the world’s only remaining holdouts when it comes to transitioning from cash to digital payments. He compares the region to other parts of the world that were in similar situations, only to witness a drastic shift. He speaks from experience: at Elavon, he helped expand the company to new markets in Europe, Mexico and Brazil.
Considering the global nature of our business, London was our first option given its mature and developed fintech and payments sector
“We have a large population [in the region]. We have sustained economic development, and a lot of the population is relatively young,” he says. “If you combine that with rising disposable income and improving economies, that means the region is ripe for transition. It has the perfect conditions.”
These conditions are remarkably similar to those previously experienced in other global markets, such as in Eastern Europe, Latin America and China, which has seen non-cash payments rise from about 10 percent a decade ago to 40 percent today.
“It’s where you’ve had those conditions, sizeable and young populations and improving economies, that you’ve seen that shift from cash to digital payments. This is the last region in the world that has yet to undergo that shift.”
Of course, not all markets are created equal, and while Haslam says that revenues are growing in each of the over 50 countries in which the company operates, it is constantly looking for new opportunities and room to expand. When it comes to these new growth opportunities, one stands out: Saudi Arabia.
“We have great aspirations for Saudi Arabia. We see it as a key market,” Haslam says. “It obviously has the largest population in the GCC, and has one of the highest GDP growths. We feel there’s an opportunity for us to bring our technology and know-how with respect to payments into that market.”
Already, Network International has set up a legal entity in the kingdom, and appointed a Saudi general manager to help with ongoing discussions with local banks. It has already signed two customers there, including the first non-bank issuer of credit cards in that market, an Islamic credit card for businesses.
We continue to grow both in volume and transactions
Much of Network International’s challenges stem from public perceptions of the benefits of cash versus digital payment methods. According to Haslam, this is rapidly changing – to Network International’s benefit – as governments increasingly adopt policies aimed at creating cashless societies.
In Egypt, for example, President Abdel Fattah el-Sisi in 2017 launched a National Council for Payments (NPC) designed to find ways to incentivise and encourage electronic payments. Here in the UAE, cashless payments are considered a top priority by the country’s Smart Government initiative. Additionally, 16 of the UAE’s top banks have come together to develop the ‘Emirates Digital Wallet’ app that will eventually be accepted at 45,000 merchants.
“I think [what such initiatives] get people doing is utilising non-cash forms of payment. If you take Africa today, still 70 percent of my transactions take place at an ATM. They’re putting cash onto prepaid credit cards from which people are drawing out cash,” Haslam explains. “That’s okay, but what it gets people doing is utilising cards, and then what we try and do is help the financial institutions create the payments ecosystem whereby those cards can be used elsewhere, apart from ATMS.”
Creating this larger ecosystem will be a key focus for Network International in the future, Haslam says.
We have great aspirations for Saudi Arabia. We see it as a key market. It obviously has the largest population in the GCC
“There’s no point in issuing cards if there’s nowhere to use them, and there’s no point in creating points of acceptance if there are no cards in use. We’re trying to solve both sides of the equation,” he says. “Our role is really to enable customers to accept any form of non-cash payment, no matter the form.”
In February 2018, it was announced that Finablr – the parent company of UAE Exchange – will also launch an IPO in London, with JPMorgan, Goldman Sachs and HSCB involved in managing the IPO alongside book-runners drawn from local and international banks. The firm has a presence in over 160 markets around the world and manages more than $100 billion in volume.
“While I cannot comment on Finablr, it is a good business – although not a payments business – and I’m sure they will do well in pursuing their own strategic options,” Haslam says of its London IPO. “However, we are very confident in the prospects of our own business. We are the only pan-regional provider of digital payment solutions at scale, with presence across the entire payments value chain in the world’s most under-penetrated payments market.”
According to a report from consulting firm EY released in London, listings on the London stock exchange are likely to remain subdued in early 2019 amid the uncertainty surrounding Brexit that drove a decline in 2018.
Last year, 79 companies listed in London raised $12.1 billion. In 2017, 95 companies raised $16.43 billion. “We expect Q1 to be more subdued than normal as companies await the outcome of Brexit negotiations, meaning activity is likely to be weighted towards the second half of the year,” says Scott McCubbin, a partner at EY’s UK division. Many companies, McCubbin adds, likely brought forward planned 2019 IPOs to the last three months of 2018 to avoid any potential fallout from Brexit. “The final quarter produced the highest number of main market listings in four years, which could be an indication that issuers had brought forward IPOs from 2019,” he said.