The news:
- Nigerian investment startup Rise has discontinued virtual card services on its platform, noting the unique challenges of providing it in Nigeria.
- The fintech said that the service will end on September 30 2024.
- This is coming after another Nigerian digital bank, Carbon also discontinued debit cards in June 2024 stating that the service was launched for the wrong reasons.
In an email to users, Rise said that its virtual card service faced challenges such as issues with providers, fluctuating exchange rates, and delays in issue resolution.
This is not the first time a fintech has reported issues with offering virtual card services. virtual card provider, Union54 also halted its services in 2022 after incurring losses to chargeback fraud.
For fintechs that did not halt card services, they had to make significant changes to the way they offered the service. In 2023, Payday which Bitmama has acquired told users that their cards will be terminated if transactions are declined due to insufficient funds.
Similarly, Chipper Cash announced that it would begin charging a ₦500 non-refundable fee for transactions declined due to insufficient funds.
In a more recent development, Carbon, a Nigerian digital bank also discontinued its debit cards. While no reason was given for this, the CEO, Ngozi Dozie said, “When I take a step back with the benefit of hindsight (and a card operation bill denominated in USD$), I question why practically all neobanks are pushing cards or even getting into it. Was this the right strategy for ALL of us, or was Carbon just unlucky?”
Meanwhile, in answering why Nigerian fintech startups are struggling with virtual cards, Tunde Adewole, Co-Founder and CEO of Bridgecard said that card schemes [like] Mastercard and VISA have a chargeback rate of around 1%. They also charge fees for declined for declined transactions and these fees range from $20 to $100.
Unfortunately, fintechs have chargeback fraud rates of over 1% and they have also had to pay for declined transaction fees.
In Carbon's case, however, the possible reasons for ending its debit card service have been linked to the cost of maintaining debit cards.
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