Lesaka Technologies sees an opportunity to triple its average revenue per user (ARPU) in its consumer business, with the aim of rivalling SA’s top banks.
According to the Corporate Finance Institute, ARPU is a metric commonly used to assess the revenue-generating capabilities at the per-customer level for a business. The metric tends to be used by customer facing operators such as digital media companies, social media firms and telecoms providers.
In an investor presentation on Monday, Lesaka — having doubled its consumer customer base in the past four years — said its APRU in the fourth quarter of its 2024 financial stood at R90. This was 13% higher than at the same time in 2023.
This is compared to an average of R280 enjoyed by SA’s banks. The group sees an opportunity to grow its ARPU to the level of the banks by increasing penetration of its existing products, while introducing or developing new products such as remittances.
The JSE- and Nasdaq-listed company, formerly Net1 UEPS Technologies, consists of two divisions: a merchant unit and a consumer segment. The consumer unit focuses on products such as unsecured credit, transactional banking, microinsurance and value-added services through the EasyPay platform.
There are now 1.8-million customers in the consumer division, 1.6-million being social grant recipients, a market that the group holds a 12% share in. The balance — 200,000 — came onto Lesaka’s books as a result of its 2024 acquisition of fintech operator Adumo.
Having grown the consumer base from about 1-million at the start 2021, some have speculated that the group is attempting to build a bank through EasyPay.
In a recent interview with Business Day, CEO Lincoln Mali referred to this unit as “a platform”. Lesaka’s consumer unit has 1.5-million customers at the moment. Of those, about 18% have both personal loan and insurance products.
The group’s strategy would be to increase the number of products that each customer uses, and then add more to the stack to increase revenue from each user. For instance, the group hopes to offer a loyalty programme in the future.
Personal lending is an area that has seen much attention and investment from fintech, as well as non-banking players over the years.
Of Lesaka’s consumer base, about 688,000 have opted in for a loan product, with more than R1.6bn worth of loans up to the value of R2,000 each having been disbursed.
To grow the consumer business, Mali and his team are attacking the market in a number of ways. One has to do with the imminent collapse of the SA Post Office, which has reduced its ability to facilitate the payment of social grants, creating an opportunity for private companies interested in a piece of the pie.
Another avenue is winning over customers from other financial institutions. The group said it also saw similar opportunity to growth APRU in its merchant division, which has been the focus of much of the group’s acquisition activities.
Lesaka has been hard at work integrating the various businesses it has acquired recently, such as Connect Group, Touchsides, Adumo and most recently Recharger.
This comes as the group reported revenue of R2.6bn for the second quarter to end-December — at the upper end of its revenue guidance — and compared with R2.7bn a year ago.
Lesaka, however, reported operating income of R14.2m for the period, much lower than the R42.5m a year earlier. Group adjusted earnings before interest, taxes, depreciation and amortisation (ebitda) were up 26% to R211.8m.
Revenue for the consumer division increased 31% in local currency to R410.7m, with segment-adjusted ebitda up 61% to R77.5m.
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