Service Interruption in Virtual Cards due to Exchange Rate Fluctuations and Provider Issues

In the vibrant Nigerian fintech landscape, several digital banks have recently decided to discontinue their debit card services. Among these, Carbon and Rise, two prominent players in the industry, have announced their decisions.

Tunde Adewole, Co-Founder and CEO of Bridgecard, has highlighted the challenge of high chargeback rates for Nigerian fintech startups using virtual cards. These rates often exceed 1%, a significant cost that Mastercard and VISA impose on transactions for Nigerian fintech startups.

Adewole did not mention any other specific challenges faced by Nigerian fintech startups with virtual cards, beyond the high costs associated with chargeback fraud and declined transaction fees. However, these costs are a substantial burden for these companies, as suggested in the case of Carbon.

The high costs of maintaining debit cards, including chargeback fees and declined transaction fees, are a significant challenge for Nigerian fintech startups. These costs can range from $20 to $100 per transaction, a substantial amount for a startup operating on thin margins.

Other fintech companies that didn't suspend their card services had to implement significant changes. Payday, for instance, terminated cards if transactions were declined due to insufficient funds. Chipper Cash has announced a ₦500 non-refundable fee for transactions declined due to insufficient funds.

The discontinuation of virtual and debit card services by Nigerian fintech companies may impact users who rely on these services for their daily transactions. However, the impact on users has not been addressed by the CEOs of these companies, including Adewole and Ngozi Dozie of Carbon.

Rise, a Nigerian investment startup, will discontinue its virtual card services on September 30, 2024. This decision follows similar actions by Carbon, which discontinued its debit card services in June 2024. The founder of Carbon is Chijioke Dozie.

It is not clear if other fintech companies in Nigeria have faced similar challenges due to the high costs of maintaining debit cards. In 2022, Union54, a virtual card provider, had to suspend its services due to chargeback fraud, suggesting that these challenges may be widespread.

Despite these challenges, the strategy of pushing cards for neobanks has been questioned by CEOs like Ngozi Dozie of Carbon, who stated that it might not have been the right strategy for all companies. The future of digital banking in Nigeria remains dynamic, with fintech startups continuing to innovate and adapt to the challenges they face.

Service Interruption in Virtual Cards due to Exchange Rate Fluctuations and Provider Issues