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| Moniepoint Verve Card Picture |
Before the COVID-19 pandemic, Nigerian fintechs found an effective strategy for attracting customers: issuing foreign debit cards. These cards, often provided at little to no cost, allowed customers to withdraw money from ATMs and make payments at supermarkets.
This not only increased customer spending but also boosted the transaction fees earned by fintechs. A former banker noted that customers were unlikely to spend money from a bank unless they had its debit card.
However, the pandemic brought significant changes. COVID-19 restrictions on in-person shopping, a cash crunch in Nigeria in 2023, and ATM cash shortages reduced the reliance on card payments. As a result, bank transfers became increasingly popular.
These changes prompted fintech startups and banks to reevaluate their card operations. Most Nigerian commercial banks, except Guaranty Trust Holding Company (GTCO), now issue Verve cards, a scheme operated by the Nigerian payments company Interswitch.
First Bank, Nigeria’s oldest bank, has issued Verve cards to over half of its card customers. Chinese-backed fintech OPay has issued 13 million Verve cards, while Moniepoint has issued around 4 million. Here's how to request and activate the Moniepoint Verve ATM Card. Since the end of the pandemic in 2021, Verve has captured 54% of the Nigerian card market.
Switching from international card schemes that charge in USD has gained popularity in Nigeria due to the naira's devaluation, making foreign currency-denominated bills more expensive. Visa and Mastercard fees vary depending on the financial institution’s size and region, with Mastercard’s pricing strategy being particularly complex.
Financial institutions face substantial requirements, such as a $2,000 monthly implementation charge, the need to open offshore accounts, annual contract renewals, and high collateral costs. Additionally, international card schemes charge Nigerian banks for dispute logging and prevent non-banks from directly connecting to their schemes, necessitating fintech partnerships with commercial banks.
These complexities have led to the growing popularity of local alternatives like Verve and Afrigo, despite significant investments from Mastercard and Visa in the continent's fintech industry. Local card schemes are more appealing because most fintech customers use cards for local payments rather than international ones.
With Nigeria experiencing its worst cost of living crisis in three decades, customer spending has decreased, impacting interchange fees and making it difficult for fintechs to achieve the high transaction volumes needed for profitability. The Central Bank's introduction of Afrigo aims to help banks reduce costs, and fintechs, eager to comply with regulatory expectations, see local card schemes as beneficial.
The rise of online transfer payments has also influenced Nigerian fintechs to develop products facilitating bank transfers. For instance, Paystack, owned by Stripe, launched two pay-by-transfer products as bank transfers accounted for 58% of its transactions in Nigeria in 2023.
Transfers offer better margins than card payments by eliminating multiple processors involved in card operations. Despite discussions about collecting fees in naira, years of FX restrictions and low global payment limits have made virtual cards popular.
Customers prioritize functionality at local stores, restaurants, and POS stalls, making the switch to local card schemes a relatively seamless transition.