The Interswitch Story: The pipes that African fintech runs on
Somewhere in Scotland, on a cold night in the late nineteen nineties, a young Nigerian engineer named Mitchell Elegbe walked up to an A T M for the first time in his life.
He had been sent over from Lagos for a short rotation with the oilfield services company Schlumberger. He was in his twenties. He needed cash. He fed his Nigerian bank card into the slot.
The machine made a small noise. The screen blinked. The card was gone. The screen blinked again and returned to its idle state. No cash. No card. No way to get either back tonight.
A small humiliation. A foreign country. A failed transaction. The kind of moment most people simply forget.
Mitchell Elegbe did not forget. Because on the long walk back, he kept turning a single fact over in his head. A machine, in a country he had never lived in, on a network he did not understand, had just tried to give a stranger from Lagos access to a Nigerian bank account. The idea was extraordinary. In Nigeria in those years, you could not even reliably use your own card at a different branch of your own bank. There was no network. There were no rails.
Mitchell Elegbe went home to Lagos. He wrote a business plan. He pitched it to a consortium of seven Nigerian banks. He raised two hundred million naira. And then, in the most unusual single decision of the entire story, he gave himself zero percent equity in the company he was founding.
This is the story of how an A T M in Scotland accidentally founded Africa’s first homegrown fintech unicorn. And of the engineer who built it without ever owning it.
This is Asili Africa. This is the story of Interswitch.
The Quiet Engineer
Mitchell Olusegun Elegbe was born on the fourteenth of November, nineteen seventy three, in Benin City, in Edo State, Nigeria. His father died before he was born. His uncle raised him in Aladja, a small town in Delta State, where he completed his secondary education.
He was, by all accounts, the quiet one. The reader. The boy who took apart radios to see what made them work. He went on to the University of Benin and graduated with honours in electrical and electronic engineering.
His mandatory year of national service, the N Y S C, sent him to a small Lagos software firm called Computer Systems Associates. Their niche was unglamorous. They connected Nigerian banks to the international interbank messaging network called SWIFT. SWIFT is the wiring that lets banks in different countries send each other money. To a twenty something year old engineer, it was an extraordinary thing to be sitting next to. He was watching how money actually moved between nations. How a wire transfer was, underneath all the ceremony, a series of standardised messages. How financial infrastructure was, at the end of the day, just software and protocols.
After his national service, he joined a Lagos firm called Telnet, an information and communications technology consulting business. He worked his way up to Group Head of Business Development. And then, in the middle of his Telnet years, came a short rotation abroad. A few months as a field engineer with Schlumberger Wireline and Testing. In Scotland.
Which is where the A T M swallowed his card.
When he returned to Lagos, he could not let the idea go. At the time, Nigeria had a population of roughly one hundred and twenty million people. The country had just emerged from sixteen years of military rule. There were dozens of banks. There were branches. There were customers. There was money. And there was effectively no electronic payments infrastructure connecting any of it together.
If you wanted to send money from your account at First Bank to your cousin’s account at Union Bank, you walked to the First Bank branch with cash. Then your cousin walked to the Union Bank branch with cash. The banks did not talk to each other. Some banks could not even reliably talk to themselves. You could not always use a card from one of their own branches at another of their own branches.
In two thousand and one, Mitchell Elegbe drafted a business plan with two of his Telnet colleagues. Charles Ifedi, who led the business plan development. And Akeem Lawal, the engineer who would build the actual switch. The plan was simple to describe and almost impossibly hard to execute. Build a national transaction switching system. A piece of software that would sit between every Nigerian bank and let any bank’s card work at any other bank’s A T M.
Mature markets had national switches. Nigeria did not. The country had been independent for forty one years. Nobody had built one. Elegbe and his co founders were going to try.
They pitched it to Telnet. Telnet agreed to spin out the venture. They pitched it to a consortium of seven competing Nigerian banks. The names of the founding shareholders are well documented. First Bank of Nigeria. Union Bank. United Bank for Africa. Zenith Bank. Three other banks of the era, several of which would later be absorbed in the great Nigerian banking consolidation. Together, the banks and Telnet put up roughly two hundred million naira. About one and a half million US dollars at the exchange rate of the time.
And then, in the most distinctive single decision of the entire story, Mitchell Elegbe gave himself zero percent equity in the company he had just founded. He did not become a founder shareholder. He became a salaried employee. C E O on payroll. The man who had the idea, who wrote the plan, who pitched it to seven banks, who would now go and build it, did not own a single share of the thing he was building.
He has said, in interview after interview, that the decision was a bet on neutrality. A national transaction switch only works if every bank trusts it. A switch owned by a founder might one day favour its founder’s interests over its customers’ interests. A switch owned by its customers, by the very banks it served, could not.
Interswitch was incorporated in Lagos in two thousand and two. The man who built it had no stake in it. And, looking back twenty four years later, that single choice may be the most important architectural decision in the history of African fintech.
The Substrate
Interswitch’s first job was the unglamorous one. They had to actually connect seven competing banks to a shared computer.
In two thousand and three, the first production switch went live. Seven banks. One network. For the first time in Nigerian banking history, a customer of First Bank could walk up to a Union Bank A T M, insert their card, and pull out cash. That sentence sounds modest. In context, in two thousand and three, it was a small revolution.
Within a year, the network grew to thirteen banks. Then it added an A T M consortium. Then it added Globacom’s mobile money platform. The thing about a national switching system is that its value grows quadratically with the number of participants. Two banks connected to a switch is a courtesy. Twenty banks connected to a switch is an industry standard. Interswitch reached industry standard quietly, before the regulator was ready to mandate it.
And then, in two thousand and four, the ground shifted under Nigerian banking. The Governor of the Central Bank of Nigeria, Charles Soludo, announced a banking consolidation programme. He gave the banks eighteen months to recapitalise to a minimum of twenty five billion naira. If they could not, they had to merge or die. By the end of two thousand and five, eighty nine Nigerian banks had been compressed into twenty five well capitalised survivors.
Those twenty five banks emerged from consolidation with capital, ambition, and an urgent need to build retail distribution at scale. They needed cards. They needed A T Ms. They needed point of sale terminals. They needed payment rails. And the only operator that had already built and proven a national switch was the small Lagos company that had been doing the unglamorous integration work for three years.
Interswitch did not have to win the post consolidation market. Interswitch was already the post consolidation market.
In two thousand and five, the federal tax authority, F I R S, partnered with Interswitch to begin collecting taxes electronically. It was the first time a Nigerian citizen could pay a tax bill through a digital channel. In two thousand and six, Interswitch launched Quickteller, a consumer payments platform that handled airtime top ups and bill payments. It was, at the time, a small product. It would later become the consumer face of the company.
And in two thousand and nine, came the most important product launch in Interswitch’s history. They launched Verve. Africa’s first domestic E M V certified payment card scheme.
The acronym matters. E M V stands for Europay, Mastercard, and Visa. It is the global standard for chip and pin payment cards. Until Verve, every card in Africa that met the E M V standard was issued under a Visa or Mastercard licence. Which meant every card in Africa carried a transaction fee that flowed, eventually, to a headquarters in San Francisco or in Purchase, New York.
Verve was different. Verve was an African scheme. Issued by Nigerian banks. Switched by a Nigerian operator. Cleared and settled in Nigeria. The card transactions stayed inside the Nigerian economy. The fees stayed inside the Nigerian economy. The data stayed inside the Nigerian economy.
By the early twenty tens, Verve had become the default card scheme of choice for many Nigerian banks. It was cheaper than Visa and Mastercard. It worked. And it was theirs.
By two thousand and nine, less than seven years after Mitchell Elegbe had taken zero equity in a company nobody had heard of, Interswitch was running the national switch, the consumer payments platform, and the domestic card scheme. The country was running on three pieces of software, all built in the same building.
And then the private equity money arrived.
From Utility To Asset
In December of two thousand and ten, a London based private equity firm called Helios Investment Partners walked into Interswitch’s offices and made an offer.
Ninety six million US dollars for two thirds of the company. Helios alone would take fifty two percent. The smaller co investor, Adlevo Capital, would take the rest. The founding bank consortium would step back. Their stakes would be diluted to minority positions. Interswitch would be, for the first time in its existence, controlled by a private equity firm rather than by the banks it served.
The deal was, on its surface, a small Africa story. Ninety six million dollars in two thousand and ten was not headline private equity money. But in the longer arc, it was the moment Interswitch crossed a line. The bank consortium that had founded the company to be a neutral utility had partially cashed out. The new owner was a profit maximising fund with a five to seven year investment horizon and an obligation to deliver a return to its limited partners.
Interswitch had been a utility. It was now an asset.
Mitchell Elegbe was, at this point, still the man with no equity. The Helios deal, and the years that followed, converted some of his accumulated executive value into a small founder stake. He was, finally, on the cap table of the company he had built. But he was not the controlling shareholder. He never would be.
What followed was eight years of aggressive scale.
In two thousand and eleven, Interswitch acquired sixty percent of a Ugandan company called Bankom. The first East African foothold. In two thousand and thirteen, they signed a partnership with the Discover network, the American card scheme. Verve cards could now be used internationally on the Discover rails. The card was no longer just a Nigerian product. In two thousand and fourteen, they acquired the Paynet Group in Kenya, which was later rebranded as Interswitch East Africa. The footprint, on paper, was now continental.
In two thousand and fifteen, with revenues climbing and the East African expansion booked, Interswitch did what Helios needed it to do. It announced an initial public offering. A dual listing on the London Stock Exchange and the Nigerian Stock Exchange. Bookrunners were appointed. The roadshow was prepared. Investors were briefed.
And then, in two thousand and sixteen, Nigeria entered a recession. The naira lost a third of its value against the US dollar in twelve months. Foreign exchange shortages crippled the Nigerian corporate sector. The dual listing was quietly postponed.
In two thousand and seventeen, the I P O was deferred again, this time to two thousand and nineteen. In two thousand and nineteen, the I P O was deferred yet again, this time to two thousand and twenty. This had become a pattern. Helios was, behind the scenes, looking for a way out. Bloomberg reported in early two thousand and sixteen that Helios had hired Citigroup to explore a sale of the company entirely.
The I P O kept not happening. But the company kept growing. Quickteller had become a household name. Verve cards were piling up in Nigerian wallets. The switch was processing more transactions every month than the year before. And somewhere in Lagos, in offices Interswitch had never really noticed, two small fintech startups called Paystack and Flutterwave were quietly building consumer brands on top of Interswitch’s rails.
The Substrate Beneath The Fintechs
On the eleventh of November, two thousand and nineteen, Visa announced that it was investing two hundred million US dollars into Interswitch for a twenty percent stake. The implied valuation was one billion US dollars.
Interswitch was now Africa’s first homegrown fintech unicorn.
The headline mattered. Jumia, the Nigerian e commerce company, had listed on the New York Stock Exchange earlier in two thousand and nineteen and crossed a billion dollar valuation in the process. But Jumia had been incubated by a German venture builder and was classified as e commerce, not fintech. Interswitch was the first African company that had been founded on African soil and grown to a billion dollar valuation as a payments and financial infrastructure business. The first homegrown fintech unicorn.
There was an irony in the Visa deal that was rarely discussed at the time. Visa owned twenty percent of a company whose flagship product, Verve, directly competed with Visa as a card scheme. Inside the Interswitch board room, the world’s largest card network now sat at the same table as Africa’s largest domestic card challenger. The internal politics of that arrangement have never been publicly disclosed. The product decisions tell the story instead. Verve has stayed domestic first. It has not aggressively chased international cross border share. It has been polite about its lane.
The unicorn moment was supposed to lead to the I P O. It did not. In two thousand and twenty, the public listing was delayed again by the COVID pandemic. Interswitch issued a twenty three billion naira corporate bond instead, listed on the Nigerian Stock Exchange. Debt, not equity.
On the twelfth of May, twenty twenty two, LeapFrog Investments and Tana Africa Capital invested one hundred and ten million US dollars more. The round was partly primary and partly secondary, a sliver of liquidity for existing shareholders, including the long suffering Helios. The Helios exit, eleven years after the original buyout, still had not happened.
But the operating story underneath the cap table story was, by any measure, extraordinary.
By twenty twenty three, Interswitch had built three quietly dominant businesses. The core switching layer, processing roughly ninety percent of all electronic payments in Nigeria. The Quickteller consumer rail, with over forty thousand payment agents and more than thirty million transactions every month. And Verve, the domestic card scheme, which had been quietly issuing cards to Nigerian banks for over a decade.
In January of twenty twenty three, on the twentieth anniversary of its founding, Interswitch received the inaugural Payment Service Holding Company licence from the Central Bank of Nigeria. The licence allowed it to formally restructure into a holding company. Switching and infrastructure on one side. Consumer products on another. Banking adjacent businesses on a third. A regulatory architecture matching the corporate architecture.
In October of twenty twenty four, Verve announced that it had crossed seventy million cards issued in Nigeria. Up from fifty million in July of twenty twenty three. Forty percent growth in fifteen months. There was now, in a country of roughly two hundred and twenty million people, approximately one Verve card for every three Nigerians. Verve had become Africa’s largest domestic payment card brand, by a wide margin.
And underneath all of it sat the substrate truth that the African tech press rarely sat with for very long. The fintechs that had become global headlines in the late twenty tens, the ones that were celebrated with magazine covers and unicorn rounds, the Paystacks and the Flutterwaves and the OPays and the Kudas, were all sitting, at least partially, on the rails that the quiet Lagos engineer with no equity had built two decades before. Before fintech was a word, Interswitch was the substrate. After fintech became a word, Interswitch was still the substrate. The companies on top changed. The substrate did not.
The Substrate Under Suspicion
In November of twenty twenty three, the publication TechCabal broke a story that, in any other industry, would have been an extinction event.
A group of current and former Interswitch employees, working with merchants on the outside, had been exploiting a system glitch in Interswitch’s chargeback workflow. Chargebacks are the mechanism by which a customer disputes a transaction and gets their money refunded. Through the glitch, the insiders had filed fraudulent chargebacks against legitimate transactions. They had been doing it for years before detection.
The estimated loss was thirty billion naira. About forty million US dollars at the time. Interswitch reported the matter to the Economic and Financial Crimes Commission, the E F C C. The company filed motions asking fifty four Nigerian banks to freeze hundreds of suspect accounts. Roughly ten billion naira was eventually recovered. At least one suspect was arrested.
The absolute number was bad. The reputational number was worse. The company whose entire business model was being the neutral, trusted substrate of Nigerian payments had been caught with insider fraud on the substrate itself.
Interswitch’s revenue still grew in the financial year ending March twenty twenty four. Twenty three percent up, to sixty six and a half billion naira. But the fraud loss and a punishing naira devaluation pushed the company into a small pre tax loss of one point six seven billion naira. Twenty two years of profitability. One year of red ink.
The recovery was quick. In the financial year ending March twenty twenty five, revenue jumped fifty percent to one hundred and thirty seven and a half billion naira. Profit after tax came back at fourteen point seven billion naira. The substrate had held.
And then, on the twenty eighth of May, twenty twenty six, a coalition of licensed payment processors, acquirers, and point of sale operators in Nigeria sent Interswitch a formal letter. The letter accused Interswitch and Verve of operating a switching exclusivity arrangement that forced every Verve card transaction to route through Interswitch’s own switch. The coalition called it monopolistic. They alleged that scheme fees exceeded what the Central Bank permitted. They threatened to suspend acceptance of Verve cards within forty eight hours if undertakings were not given.
The Central Bank of Nigeria summoned all parties. Interswitch’s defence was that the new routing rule was a fraud prevention measure. That processors had been bypassing the network to allow untraceable transactions. As of the date of this episode, the matter is unresolved.
The central tension of Interswitch’s third decade is now visible in the open. The company that built Nigeria’s payment rails is being asked, by the next generation of fintechs, whether it can also be a fair operator on them.
A week later, on the fourth of June, twenty twenty six, Interswitch announced a continent wide partnership with Temenos, one of the world’s largest banking software companies. Interswitch will use Temenos’s stack to offer managed banking technology services to financial institutions across thirty two African markets. It is the most significant strategic pivot since the Visa deal. From being the payments switch beneath Africa’s banks, Interswitch is moving towards being the banking platform inside Africa’s banks.
And Mitchell Elegbe, sixty five years old, twenty four years into the C E O chair, is still running it. His estimated personal net worth is around two hundred million US dollars. A meaningful sum. A small fraction of what an ordinary founder’s equity in a billion dollar fintech would be worth. He is, even now, not the controlling shareholder of the company he built. He is the man who took no equity to keep the substrate neutral. And, by his own measure, the company is still neutral. The bet was paid.
Mitchell Elegbe’s story is, in the end, about a single failed transaction in a Scottish town nobody remembers. A card swallowed by a foreign machine. An engineer who, instead of complaining, came home and built the machine he had just been embarrassed by.
He gave himself no equity. He chose neutrality over wealth. And in doing so he built the substrate that every Nigerian fintech in the modern era has stood on. Visible or not. Acknowledged or not.
Every empire has an origin. This one began on a cold night in Scotland, with a card that did not come back out.
This is Asili Africa. Every empire has an origin.
Key Takeaways
- The Quiet Engineer. Mitchell Olusegun Elegbe was born on the fourteenth of November, nineteen seventy three, in Benin City, in Edo State, Nigeria.
- From Utility To Asset. In December of two thousand and ten, a London based private equity firm called Helios Investment Partners walked into Interswitch’s offices and made an offer.
- The Substrate Beneath The Fintechs. On the eleventh of November, two thousand and nineteen, Visa announced that it was investing two hundred million US dollars into Interswitch for a twenty percent stake.
- The Substrate Under Suspicion. In November of twenty twenty three, the publication TechCabal broke a story that, in any other industry, would have been an extinction event.
Also available on YouTube — search “Asili Africa” or subscribe to our channel.