Nigerian banks and fintech companies are increasingly turning to local payment cards like Verve and Afrigo, moving away from international options like Visa and Mastercard. This shift is driven by changing consumer habits and economic factors, marking a significant transformation in Nigeria’s digital financial landscape.
Before the COVID-19 pandemic, fintechs in Nigeria drew in customers by offering foreign debit cards, often at little to no cost. These cards made it easy for users to withdraw money from ATMs and make purchases, boosting spending and transaction fees for fintechs. However, the pandemic, cash shortages, and evolving consumer preferences have reduced reliance on these cards, leading to a rise in bank transfers.
In response, Nigerian banks and fintechs are rethinking their card operations. Almost all major Nigerian banks, except Guaranty Trust Holding Company (GTCO), now issue Verve cards, a product of the Nigerian payments company Interswitch. First Bank, Nigeria’s oldest bank, has already switched over half of its card customers to Verve.
Local fintech companies are also jumping on board. OPay has issued 13 million Verve cards, while Moniepoint has issued about 4 million. Verve now controls 54% of the Nigerian card market, reflecting a significant move away from international schemes.
Several factors are driving this change. The devaluation of the naira has made fees for foreign currency-denominated cards more expensive. Additionally, international card schemes impose complex and costly requirements on financial institutions, including high implementation charges, the need for offshore accounts, and significant collateral.
Local alternatives like Verve and Afrigo offer simpler, cost-effective solutions. For most customers, who use their cards primarily for local transactions, the global payment capabilities of international cards are less important. With rising inflation and the highest cost of living crisis in decades, the focus has shifted to affordability and practicality.
The Central Bank of Nigeria has also promoted Afrigo, a local card scheme, to help banks reduce costs. This initiative aligns with the regulator’s efforts to monitor and control the fintech sector, especially after a recent ban on onboarding new customers.
The rise of online transfer payment methods has further influenced this shift. Companies like Paystack, owned by Stripe, have introduced products to facilitate bank transfers, which accounted for 58% of transactions in 2023, up from 28% in 2022. These transfers offer better margins than card payments by eliminating multiple processing fees.
