On the surface, Nedbank’s recent announcement to acquire fintech firm iKhokha for R1.65 billion in cash seems like a standard case of a big bank buying innovation. But a closer look at Nedbank’s own financial reports reveals a more complex and urgent story. The deal isn’t just about gaining a foothold in the booming small and medium-sized enterprise (SME) market; it’s a calculated maneuver to solve a growing profitability crisis within one of its key divisions. The central question is, with successful partnerships already in place with iKhokha and its main rivals, Yoco, HelloPay and Nightsbridge, why buy one of them outright?

The answer lies in the numbers.

The Profitability Squeeze

In the first half of 2025, Nedbank’s Card Acceptance and Commercial Issuing division saw its headline earnings plummet by a staggering 71%, dropping to R37 million from R128 million the previous year. This occurred despite a healthy 6% increase in card payment volumes and a massive 32% surge in e-commerce transactions.

The bank was processing more money than ever but making significantly less profit from it.

The culprits, as stated in its report, were “higher processing costs owing to higher POS device fees” and a 13% jump in expenses linked to investments in digital capabilities. In simple terms, the very technology and partnerships designed to capture the SME market were eating into its profits. While its collaboration with payment facilitators like iKhokha, Yoco, and HelloPay was successful — boosting turnover from these partners by 18% — it was clear that being just a partner was not enough. The bank was paying a premium to participate in a market it didn’t control, and the model was becoming unsustainable.

Why Buy the Partner Instead of Just Partnering?

Owning iKhokha is Nedbank’s answer to this dilemma. While a partnership gives a bank a slice of the revenue, an acquisition provides control over the entire value chain — from the technology and device costs to the customer relationship.

1. Reclaim the Margins: By owning iKhokha, Nedbank can directly manage the hardware and software costs that were eroding its margins. It moves from being a client of payment technology to the owner of it, allowing for better cost efficiency and the ability to set its own terms.
2. Deeper Integration and “Stickier” Customers: A partnership allows Nedbank to process transactions. Ownership allows it to embed its core banking products directly into the iKhokha ecosystem. For an iKhokha merchant, this could mean seamless access to a Nedbank business account, instant loans based on sales data, and other financial tools without ever leaving the iKhokha app. This creates a much “stickier,” long-term relationship that is harder for competitors to disrupt. “By combining their innovative technology with our deep banking experience, we will provide small business clients with the best-in-class tools they need to thrive,” explained Ciko Thomas, a Nedbank Group Managing Executive.
3. Neutralize a Threat: iKhokha is a significant player in its own right, processing over R20 billion in payments annually and having already provided more than R3 billion in working capital to SMEs. Acquiring the company gives Nedbank ownership of a fast-growing, agile business with a strong brand and a direct line to hundreds of thousands of entrepreneurs. It’s a strategic shift from being a service provider to a platform owner. As Nedbank CEO Jason Quinn put it, “iKhokha’s mission and technology align perfectly with our vision for digital transformation in the SME sector.”

A Market Reshuffle

The acquisition is set to send ripples across the industry. For iKhokha’s rivals, Yoco and HelloPay, the landscape has changed overnight. They now find themselves in the awkward position of competing with a company owned by one of their key banking partners. This could push them to align more closely with other major banks, intensifying the competition for the lucrative SME market.

For iKhokha, the deal provides the massive balance sheet and resources of a major bank. CEO and co-founder Matt Putman noted the deal gives them a “platform to scale our impact” and explore expansion into other African markets. The company will continue to operate as a separate brand, retaining its leadership team and nimble culture — a key factor in its success.

Ultimately, Nedbank’s acquisition of iKhokha is a frank admission that in the modern financial landscape, it’s not enough to simply partner with agile fintech firms. To truly win, you have to own the engine. It’s a R1.65 billion bet that by bringing one of its most successful partners in-house, it can finally make the booming SME payments market truly profitable.

This is where the deal becomes an exemplary tale for the broader fintech ecosystem.

The broader warning is for any fintech whose model relies on partnering with incumbents. The iKhokha deal is a precedent. It signals that legacy institutions are no longer content to sit on the sidelines. When a collaboration proves a market’s value, they will use their immense capital advantage to move from partnership to ownership, either by acquiring the fintech directly or by buying a competitor.

The era of friendly, arm’s-length collaboration may be drawing to a close. For fintechs, the message from Nedbank’s move is brutally clear: choose your partners wisely, because they might just become your new boss — or the new boss of the company across the street.