Executive Summary

Jump to section

• Overview & contents
• i. Important Notice and Basis of Preparation
• 1. Executive Summary
• 2. The Opportunity
• 3. Market and Regulatory Context
• 4. Product, Technology and Security
• 5. Go-to-Market and Unit Economics
• 6. SWOT and Competitive Position
• 7. Financial Projections
• 8. Cash, Funding and the Balance Sheet
• 9. Sensitivity and Scenario Analysis
• 10. Risk Analysis
• 11. Regulatory, Compliance and Licensing
• 12. Organisation and Management
• 13. Implementation Roadmap
• 14. Key Performance Indicators
• 15. The Offer, Returns and Recommendation
• 16. Assumption Register
• A. Appendix A: Consolidated Financial Summary
• B. Appendix B: Volume, Pricing and Unit Economic Schedules
• C. Appendix C: Funding, Cash and Balance Sheet Schedules
• D. Appendix D: Risk Register
• E. Appendix E: Glossary

1.1 The proposition

Switchpoint is a merchant acquirer built for two South African merchant populations that the hardware-led card-acceptance market serves poorly: independent healthcare practices, and trade counters selling building materials, agricultural inputs, electrical supplies and automotive parts.

The company operates two payment rails behind a single merchant relationship. The first is conventional card acceptance, priced at a merchant discount rate and settled through a sponsoring bank. The second is account-to-account settlement over South Africa’s real-time low-value credit-push infrastructure, priced at a percentage of value but capped in rand terms per transaction. Merchants are acquired not through field sales but through integration into the vertical software they already run.

1.2 The commercial fact the plan is built on

A builders’ merchant selling a R48 000 pallet of cement and reinforcing steel to a contractor faces a card fee of roughly R1 176 at prevailing rates. Gross margin on bulk building materials is frequently in the range of eight to fourteen per cent, so a card fee of 2.45 per cent consumes between eighteen and thirty per cent of the gross margin on that sale. No merchant accepts that, and consequently these flows do not appear on card rails at all.

What happens instead is manual electronic funds transfer, with reconciliation performed by hand against bank statements, payment references mistyped, proofs of payment forged, and the merchant carrying credit risk on every release-before-clearance decision. A rand-capped fee of R25 on that same R48 000 invoice is 5.2 basis points. It is affordable to the merchant, it delivers irrevocable cleared funds within seconds, and it carries a structured reference that reconciles automatically.

1.3 What the financial model actually shows

Five findings emerge from the model that a reader should absorb before any other part of this document.

▪ Volume is a misleading measure of this business. Account-to-account settlement represents 69 per cent of total payment volume by FY2031 but only 43 per cent of payment-rail net revenue, and 39 per cent of total net revenue. The rand cap holds the account-to-account net take rate at approximately 30 basis points against card’s 93. The blended net take rate declines from 64 basis points in FY2027 to 56 in FY2031 — growth in volume actively dilutes price, and any valuation anchored on total payment volume will materially overstate what this company is worth.

▪ The segment carrying the thesis has the weaker unit economics. The trade segment generates the account-to-account volume on which the entire strategy rests. It also carries an acquisition cost of R46 000 and a thirty-six-month lifetime-value-to-acquisition-cost ratio of 1.9 times, below the 3.0 threshold most investors underwrite to, and does not clear it until FY2031. The practice segment, at 5.3 times rising to 7.8, subsidises it for the first four years. If practice acquisition underperforms there is no internal source of funding for the trade build-out.

▪ The round being raised does not reach profitability. The R22m seed provides nineteen months of runway to cash zero, with a trough of R5.6m in month 15. EBITDA breakeven occurs in month 45. Reaching it requires a Series A of approximately R85m closing by month 16, which requires a fundraising process commencing no later than month 10. The seed round buys the evidence needed to raise that round; it does not buy independence from it.

▪ Terminal-year profitability is hostage to card pricing. FY2031 EBITDA of R19.2m reaches zero at 18.3 basis points of further card price compression beyond plan, and at 25 basis points the figure is negative R7.1m. The plan already assumes the merchant discount rate falls from 2.45 per cent to 2.26 across the horizon. A further 18 basis points is not a remote scenario in a market where scale acquirers compete on headline rate; it is arguably the base case. This is the single largest risk in the plan and it sits almost entirely outside management control.

▪ There is no business at all without a sponsoring bank. A non-bank cannot clear or settle in the South African National Payment System in its own right. Switchpoint requires a sponsorship arrangement with a settlement bank, together with the associated third-party payment provider designation, card scheme registrations and PCI DSS Level 1 attestation. Until that sponsorship agreement is executed, every other element of this plan is contingent.

1.4 Financial summary

1.5 The ask

Switchpoint seeks R22m in seed equity at a pre-money valuation of R57m, representing 28 per cent of the post-money share capital. Proceeds fund platform build, sponsor bank and scheme certification, PCI DSS Level 1 attestation, the first two integration partnerships and the initial merchant book to approximately 530 live merchants — the evidence base required to raise an institutional Series A.