Nigeria's leading & reliable financial institution, OPay and Moniepoint have collectively issued 17 million Verve cards, marking a significant shift from international card networks like Visa and Mastercard.
This transition reflects a growing trend among Nigerian financial technology companies to adopt local alternatives, catering to the unique needs of the domestic market. A change in consumer behaviour and macroeconomic conditions are leading Nigerian banks to issue local cards like Verve to customers.
Before the COVID-19 pandemic, Nigerian fintechs stumbled on
an easy customer acquisition strategy: issuing foreign debit cards. These
cards, often issued for free or next to nothing, ensured fintech customers
could withdraw money at ATMs, or pay at supermarkets. Giving customers debit
cards increased spending, allowing fintechs to earn more transaction fees.
“No regular Nigerian was going to spend [their] money from
your bank if they did not have your card,” a former banker who asked not to be
named said.
However, COVID-19-related restrictions on in-person
shopping, a cash crunch in Nigeria in 2023, and cash shortages at bank ATMs
have changed those assumptions and reduced the reliance on card payments. They
have also led to the growing popularity of bank transfers.
Fintech startups and banks are reevaluating their card
operations in line with these new realities, and all Nigerian commercial banks,
except Guaranty Trust Holding Company (GTCO), now issue Verve, a card scheme
operated by Nigerian payments unicorn Interswitch.
First Bank, Nigeria’s oldest bank, has issued Verve cards to
over half of its card customers, said one person with knowledge of the matter.
Chinese-backed fintech OPay has issued 13 million Verve
cards, while Moniepoint has issued about 4 million. Since the Covid pandemic
ended in 2021, Verve has controlled 54% of the Nigerian card market.
Moniepoint declined to comment on the figures.
Switching from the international card schemes — which charge
in USD — has become popular following the naira’s devaluation, making
FX-denominated bills more expensive.
Visa and Mastercard fees vary and depend on the financial
institution’s size and region. The pricing strategy of these international card
schemes is also complicated; Mastercard’s pricing guide is a 300-page document,
said one financial industry expert.
Financial institutions must also meet requirements like a
$2,000 monthly implementation charge, opening an offshore account, renewing
their contracts annually, and collateral that runs into millions of dollars
said three people with knowledge of card operations. International card schemes
also charge Nigerian banks a fee for logging disputes on their resolution
channels.
They also prevent non-banks from connecting directly to
their card scheme, forcing fintechs to partner with commercial banks already on
card schemes.
These complexities are driving the popularity of local
alternatives like Verve and Afrigo despite heavy investment from Mastercard and
Visa on the continent. Both companies have poured at least $700 million into
the continent’s fintech industry to stay relevant.
Visa and Mastercard did not respond to a request for
comments.
Besides the money, Verve and Afrigo make sense
The decision to switch to local card schemes is also
connected to customers’ use of cards for local payments. With spending power
under pressure because of inflation, the ability to make global payments, which
the big card schemes offer, is useful to only a small percentage of customers.
“Majority of fintech customers use cards for POS
transactions. They are not shopping on Amazon or online outside the country,”
an employee at a Nigerian card scheme said.
Nigeria is also facing its worst cost of living crisis in
three decades, reducing customer spend and causing a drop in interchange — the
fees merchants pay for card processing — a problem for fintechs that need a
high volume of transactions to break even with cards.
Under Godwin Emefiele, the Central Bank launched Afrigo, a
local card scheme, and said it could help banks save costs. Fintechs, now
firmly in the scope of regulators after a six-week ban on onboarding new
customers, are eager to get in the regulator’s good books and see this as an
easy route, according to one person familiar with the talks.
The rise of the online transfer payment method has also
meant that Nigerian fintechs are making products that facilitate bank
transfers. Stripe-owned Paystack has launched two pay-by-transfer products in
recent months as bank transfers represented 58% of its transactions in Nigeria
in 2023, up from 28% reported in 2022. Those transfers offer better margins
than card payments as the multiple processors involved in card payments are
eliminated.
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