Naspers’s R2.4-billion takeover of Turkish online payment firm Iyzico consolidates its presences in one of the most dynamic e-commerce markets in the developing world.

The deal sees its payment subsidiary PayU merge its operations with those of Iyzico, which was founded by German-born Turks Barbaros Özbuğutu and Tahsin Isın in 2013.

Mario Shiliashki, CEO of the Global Payment Organisation at PayU, says there had always been “respectful competition” between PayU and Iyzico, but after getting to know its owners, they figured they could achieve more if they merged their businesses.

The merged entity will have a solid footing in an e-commerce market that is growing at a rapid rate. Shiliashki says that by some estimates the market is about US$10-billion/year and expanding at 20-30% annually. “It’s a young country with incredible mobile penetration.”

He says despite the growth, e-commerce is still relatively small in Turkey, making up only about 5% of the total retail market.

By joining up with Iyzico, Shiliashki says the entity is better positioned to tap into Turkey’s three million small and medium-sized businesses as it has a product that is specifically designed for these enterprises. With only about 5% of these businesses selling online, there is an expectation that this figure could grow as by as much as a factor of five to 10 over the next few years.

‘Twice as fast’

The deal in Turkey ties in with Naspers’s strategy of moving into online payments across the developed world. The media group said in its latest annual report that PayU is “one of the largest online payment service platforms in the world” and the leading provider in 17 countries in Africa and the Middle East, Central and Eastern Europe, India and Latin America.

It also noted that “online payments in emerging markets are expected to grow twice as fast as in mature markets”. The move toward cashless payments and an acceleration in online cross-border payments is expected to drive this growth.

PayU also launched its payment service in Kenya this week.

Economic growth in the East Africa region is expected to remain at a steady 5.9% in 2019, which is significantly higher than North Africa at 4.9% and Southern Africa at 1.2%, according to the African Development Bank.

“Kenya is a powerful and growing market, ideally suited for investment and expansion for high-velocity merchants,” says Corrie Bakker, head of strategy and business development at PayU Africa.

Although Shiliashki and Naspers have high hopes for the payment operations, PayU has yet to deliver a profit. It grew revenue 48% to $25-billion, but still incurred a $64-million trading loss for the financial year to 31 March. Shiliashki said Naspers did not give regional breakdowns of PayU’s operations but did say the merged entity will be profitable.

Though Turkey is widely seen as a growth market, like South Africa, its economy is struggling. The World Bank pointed out in April that over the past year, Turkey “has experienced intense market turbulence, and by end-2018, the nominal effective exchange rate had declined by 25%, consumer inflation was above 20% and policy interest rates had tripled to 24%.”

Shiliashki acknowledges that the slowing economy is a problem, but says this could end up driving e-commerce because people tend to start looking for more deals online.