Chipper Cash will now charge users for declined transactions. Here's why

May 3, 2023
2 min read

Nigerian users of Chipper Cash's virtual dollar and naira cards will now be charged a non-refundable fee of ₦‎500 for transactions that fail due to insufficient funds. The fintech revealed this in a blog post on its website. Explaining the reasons for this development, the startup revealed that the card scheme that powers its cards, charges it for every declined transaction, adding that it makes no profits from these charges.

Over the last two years, virtual cards have gained mainstream acceptance among Nigerians as they struggle to access foreign exchange to pay for international subscriptions or shop online. Fintechs like Chipper Cash and Payday have stepped in with virtual cards that ease the process, albeit at unofficial exchange rates. Like every other card provider, Chipper Cash incurs a cost from the card scheme every time it facilitates a transaction. However, even failed transactions attract a fee, as Chipper Cash's statement shows, leading to their decision to pass on those costs to consumers.

Although these virtual cards solve the problem for consumers, it has thrown up even more challenges for the providers with high rates of chargeback fraud and declined transactions reported. In 2022, Union54, a startup that provided the infrastructure with which startups issued virtual cards paused the service citing high rates of chargeback fraud for the decision. Unsurprisingly, Chipper Cash's decision to charge users for declined transactions due to insufficient funds has drawn the ire of users, with many hinting at leaving its service.

While the reaction is hardly surprising, it once again brings into focus the strategies used by African fintech startups as they attempt to gain new customers. Digital banks like Kuda have used perks like free transfers and its overdraft facility to entice customers. Users have also been known not to be charged the fees that many commercial banks charged. So when Kuda began charging users ₦50 for deposits above ₦10,000, customers were understandably dissatisfied. This was despite the fact that commercial banks in the country already did the same.


As funding declines and startups are forced to generate revenues, many of these practices are now being shelved. Time will tell but for now, it appears shiny technologies do not make up for the unique nature of the African market.

Accidental writer, covering Africa's startup landscape and its heroes. Find me on Twitter @chigo_nwokoma.
Accidental writer, covering Africa's startup landscape and its heroes. Find me on Twitter @chigo_nwokoma.
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Accidental writer, covering Africa's startup landscape and its heroes. Find me on Twitter @chigo_nwokoma.

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