Paystack combines transaction-based fees, value-added services, and device sales for profit.
**Disclaimer:** This analysis is based on publicly available information and industry trends and should not be considered complete or definitive. It does not represent Paystack’s proprietary strategies or offer financial advice. However, by examining their services and offerings, we can infer the frameworks they might use.
Eight years ago, Paystack changed everything about ‘payments’ for merchants, especially in Nigeria. The truth is that it provided them with a platform for accepting payments via a variety of channels, and it was fast at it, too.
But you probably already knew that, right? If not, don’t worry—we recently covered everything you need to know before using the Paystack platform.
In this article, however, we will not be talking about stuff that you already know. Instead, we will be focusing on stuff that you do not know about Paystack.
First, we’ll start by exploring how Paystack has evolved over the years. And, as the title suggests, we’ll break down how this payments giant generates its revenue.
Paystack’s Profile
To provide a comprehensive overview of Paystack, here are some key details about the company:
| Name | Paystack |
| Website | https://paystack.com |
| Founding date | January 2015 |
| Founder(s) | Shola Akinlade and Ezra Olubi |
| Employees | Approximately 200 |
| Headquarters | Lagos, Nigeria |
| Industry | Finance Services |
| Business Type | Online and offline payments |
| Key Services | Payment processing, fraud detection, payment gateway, API for developers |
| Competitors | Flutterwave, Interswitch, Monnify, Squad |
| Contact email | hello@paystack.com |
The journey since 2015
With the rise of digital commerce, Shola Akinlade and Ezra Olubi decided it was time, in 2015, to embark on a mission to simplify payments for African businesses. Paystack’s early innovation—enabling merchants to accept payments via multiple channels like cards, bank transfers, and mobile money—quickly made it a favorite among Nigerian businesses.
Despite their bold vision, Paystack’s first application to Y Combinator (YC) was rejected. However, with encouragement from tech entrepreneur Oo Nwoye and a refined pitch, Shola reapplied. By 2016, Paystack became the first Nigerian company to be accepted into YC, a milestone that provided the startup with a springboard for growth and funding.
By the end of 2016, Paystack had onboarded 1,407 live customers, processing over 200,000 transactions worth ₦1.1 billion. In 2017, the company achieved another milestone, handling over ₦1 billion in monthly transaction value. By September 2018, this figure had grown to over ₦10 billion (~$27.5 million).
Paystack stood out in the market with features like the “transfer from bank” option, addressing accessibility and quality gaps left by competitors like Interswitch. These customer-centric innovations propelled Paystack to the forefront of Africa’s payment landscape.
Global payments leader Stripe noticed Paystack’s rapid ascent, first investing in its Series A round in 2018. Although acquisition talks began shortly after, it wasn’t until 2020 that Paystack officially joined the Stripe family in a deal reportedly worth over $200 million. This marked a turning point, equipping Paystack with the resources to scale while staying true to its mission of empowering African businesses.
In 2022, Paystack expanded its regional footprint, acquiring a Payment Service Provider (PSP) license in Ghana in March and another in Kenya in November.
The company’s momentum continued. By 2023, Paystack had ventured into offline channels, introducing agency banking and tools tailored to small businesses and solo entrepreneurs. Features like Pay with Pocket, Storefront for digital creators, and discount codes further underscored its commitment to innovation.
However, growth came with challenges. In November 2023, Paystack announced a strategic shift to focus on its core African markets, resulting in the difficult decision to downsize its international team. This move aimed to sustain growth while staying close to its foundational mission.
Today, Paystack operates across four African countries, powering over 26 payment options and partnering with businesses of all sizes. Nearly a decade since its founding, Paystack remains at the forefront of fintech innovation, helping African businesses scale to new heights.
Possible business model for Paystack
Here’s a breakdown of how Paystack generates revenue:
1. Transaction Fees
Local Transactions: Paystack collect 1.5% + ₦100 on each local transaction. For amounts under ₦2,500, the ₦100 fee is waived, and charges are capped at ₦2,000 per transaction.
International Transactions: Paystack takes 3.9% + ₦100 for international transactions. These are settled in Naira by default, but merchants can opt for USD settlements.
USSD Transactions: Revenue comes from a 1.5% + ₦100 fee (capped at ₦ 2,000), with a waiver of the ₦100 for small transactions under ₦2,500.
2. Transfer Fees
Transfers within Paystack incur fixed fees depending on the amount:
₦10 for transfers ≤ ₦5,000.
₦25 for transfers between ₦5,001–50,000.
₦50 for transfers > ₦50,000.
3. Virtual Account Charges
- Dedicated Virtual Accounts (DVA) and Virtual Terminals attract 1% fees per transaction, capped at ₦ 300.
4. POS Terminal Sales and Fees
Paystack sells POS devices like the SmartPeak P1000 for ₦85,000 – ₦100,000.
Card payments made via terminals are charged at 0.5%, capped at ₦1,000 per transaction. Other payment channels (like USSD and bank transfers) have corresponding fees similar to online transactions.
5. Value-added Features and Tools
- Paystack offers robust APIs, allowing businesses to build custom payment solutions. While integration is free, the transactions processed via these solutions incur regular fees.
6. Volume Discounts
- Merchants with high transaction volumes receive reduced fees, incentivizing larger businesses to adopt Paystack.
7. Global Expansion
- Paystack’s ability to process international payments and settle in USD appeals to businesses targeting global markets. This increases international transaction volumes, generating higher revenues due to the 3.9% fee.
Hypothetical Revenue Breakdown
We created a hypothetical breakdown of Paystack’s estimated monthly revenue from local transactions. Local transactions refer to Naira payments processed by Paystack for merchants on its platform, regardless of the channel used.
| Amount | Fee (1.5% + ₦100) | Cap | Rev (10k Txn) | Rev (100k Txn) | Rev (1m Txn) |
| ₦1000 | ₦15 | no | ₦150,000 | ₦1,500,000 | ₦15,000,000 |
| ₦10,000 | ₦250 | no | ₦2,500,000 | ₦25,000,000 | ₦250,000,000 |
| ₦200,000 | ₦2,000 | yes | ₦20,000,000 | ₦200,000,000 | ₦2,000,000,000 |
Explanation of Columns:
Amount (₦): Transaction amount processed.
Fee (₦): Fee charged for the transaction.
Cap (₦): Indicates whether the fee is capped.
Txn: Number of transactions processed (e.g., 10k = 10,000 transactions).
Rev Xk (₦): Revenue generated for the corresponding transaction count.
Breakdown
For 10,000 transactions:
Min Revenue: ₦150,000 (₦1,000 payments).
Max Revenue: ₦20,000,000 (₦200,000 payments).
For 100,000 monthly transactions:
Min Revenue: ₦1,500,000 (₦1,000 payments).
Max Revenue: ₦200,000,000 (₦200,000 payments).
For 1,000,000 monthly transactions:
Min Revenue: ₦15,000,000 (₦1,000 payments).
Max Revenue: ₦2,000,000,000 (₦200,000 payments).
Based on our research, Paystack currently processes over 1,000,000 local transactions each month. The company could be generating up to ₦2,000,000,000 ($1.5M) in monthly revenue from local transactions, which constitute a significant portion of its overall revenue.
In essence, Paystack profits firstly, from large-scale adoption by businesses handling frequent transactions, supporting diverse payment channels like cards, USSD, mobile money, and POS terminals to attract a wide range of customers, and boosts its margins through international payments charged at a higher 3.9% fee.
Why Paystack’s model works
Millions of merchants in Africa used to struggle with accepting payments. One major challenge was the high cost of setting up and maintaining payment processing solutions. Another significant barrier was compliance, as banks often hesitated to work with low-volume merchants or those with varying levels of KYC documentation.
Before Paystack, a small boutique business in Nigeria would have found it nearly impossible to set up a payment processing solution to accept card payments due to the high upfront and maintenance costs.
Since 2015, Paystack has made it free and straightforward for merchants to set up a complete payment stack and accept both card and non-card payments from their customers. Instead of charging upfront infrastructure fees or recurring maintenance costs, Paystack charges merchants only on successful transactions. Furthermore, even merchants without legal business registration can start accepting payments on Paystack with ease.
By innovating in pricing and compliance, the company has generated millions of dollars for its founders and equity owners.
Like Grey, Paystack has earned the trust of the African e-commerce market by building strong partnerships and scaling steadily. With easy Shopify integrations, low chargeback rates, and reliable security, it’s a system that works. For a company that’s crossed the five-year mark—a critical milestone for proving staying power—it’s clear Paystack’s approach is paying off.
