Nigerian Fintechs Embrace Local Cards Over Visa and MasterCard

Nigerian Fintechs embrace local cards over Visa and MasterCard. Nigerian fintechs are strategically turning away from international giants Visa and MasterCard in favor of local alternatives like Verve, signaling a significant shift driven by changing consumer behavior and economic conditions.

Historically, Nigerian fintechs relied on foreign debit cards to attract customers, offering them as a tool for easy withdrawals and payments. However, disruptions caused by the COVID-19 pandemic and subsequent economic challenges have reshaped these strategies.

Restrictions on in-person shopping, cash shortages, and currency devaluation have diminished reliance on card payments, with bank transfers gaining popularity.

Central Nigerian banks, excluding Guaranty Trust Holding Company (GTCO), have embraced Verve cards, operated by local payments unicorn Interswitch. First Bank, for instance, has issued Verve cards to over half of its cardholders, underscoring a broader industry trend.

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Fintech giants like OPay and Moniepoint have also followed suit, issuing millions of Verve cards since the pandemic’s peak in 2021. Verve’s rapid adoption, commanding a 54% share of Nigeria’s card market, is an exciting highlight of the industry’s growth and the shifting dynamics away from international options.

Cost considerations partly drive the move away from Visa and MasterCard. With the naira’s devaluation, fees denominated in USD have become prohibitive, compounded by complex fee structures and stringent operational requirements imposed by international schemes. These include substantial monthly charges, offshore account mandates, and high collateral demands, which weigh heavily on financial institutions.

Moreover, the preference for local cards aligns with customer behaviour focused primarily on domestic transactions rather than global spending. Amid Nigeria’s economic challenges, spending power has dwindled, reducing demand for high-cost international transactions.
The regulatory landscape has also played a role, with Nigeria’s Central Bank launching Afrigo, a local card scheme, aimed at reducing costs for banks. Fintechs, recently under regulatory scrutiny, view local card schemes as a strategic move to align with regulatory priorities and operational efficiencies, particularly in cost reduction.

In response to these shifts, fintechs are diversifying their payment offerings, with bank transfers gaining more prominence over card transactions. Products facilitating online transfers have gained traction, offering better margins and operational efficiencies compared to traditional card payments.

Despite the complexities and scale required to operate card schemes profitably, local alternatives like Verve and Afrigo are gaining ground, supported by regulatory incentives and evolving consumer preferences. As the fintech sector navigates these changes, the shift towards local payment solutions marks a significant transformation in Nigeria’s digital financial ecosystem.

Now reading: Nigerian Fintechs embrace local cards over Visa and MasterCard.