Market News

by Bunmi Aduloju

The resumption of international transactions on naira cards has pitted the banks against financial technology (fintech) companies offering virtual dollar cards, as Nigerians now have more options than they did in the last three years.

Between July 2022 and January 2023, Standard Chartered Bank, First Bank of Nigeria (FBN), Guaranty Trust Bank (GTBank), and Zenith Bank announced the suspension of international transactions on their naira debit card, giving rise to fintechs like Chipper Cash, GoMoney, Cardtonic, Wallet Africa, BoldSwitch, Geegpay, and Fundall to fill the vacuum.

Within the last three years, the fintechs enabled Nigerians without a bank dollar card to pay for services like Amazon, AliExpress, Netflix, Spotify, YouTube and conduct other international transactions.

However, their market share is about to shrink as banks’ naira cards can now be used for cash withdrawals on automated teller machines (ATMs) abroad, purchases on international websites, and point-of-sale (POS) payments outside Nigeria.

FACTORS THAT WILL DECIDE USERS’ NEXT MOVE

With Nigerians now having more options, some users told TheCable that several factors like spending limit, foreign exchange (FX) rates, as well as wider platform acceptance, will determine their next move.

Geoffrey Nwankpa, a frequent user of dollar virtual cards, who said he is willing to switch to a bank naira card due to certain charges that come with using fintech virtual cards, said the spending limits on cards will determine his decision.

While noting that payment for foreign transactions would not be difficult anymore, Nwankpa hoped that “the commercial banks would not put absurd limits on international transactions. Imagine putting a limit of $1,000 a month for me. It cannot work. So I hope their limits will be fair”.

Also, he said the exchange rates are another factor to consider, as one of the fintechs he is using charges “outrageous rates”.

“You might purchase a dollar at N1,800, and then to sell it will be like N1,500. On top of that, you have $1 monthly card maintenance. If you send or receive USDT, there will be a deduction,” he said.

“Let’s say I send out $100 from my fintech wallet. I would be receiving about $98.5 on my exchange. It is the same for receiving.”

Also, Odudu Inyang-Udoh, who uses two virtual credit cards, described both as “seamless,” however, he said he is considering whether to continue using fintech platforms.

Inyang-Udoh said his decision will hinge on “transaction charges and limits, exchange rates, etc,” adding that he would gladly switch if the naira debit card offered better value for money when making online purchases.

He added that reliability, in terms of wider platform acceptance, also matters to him.

“Potentially, I also see ease of payment for online transactions, especially on international platforms. But everything depends on how the advantages of using the naira debit card outweigh virtual credit cards,” Inyang-Udoh said.

DIFFERENCES IN NAIRA AND VIRTUAL CARDS FOR FOREIGN TRANSACTIONS

TheCable understands that banks have lower transaction limits compared to fintechs, as Wema Bank and First Bank offer $1,500 quarterly, GTBank restricts users to $1,000 quarterly, and UBA has a daily and monthly limit of $1,000 — depending on the card used.

However, Chipper Cash and Eversend have a monthly spend limit of $10,000, Geegpay restrict users to $5000 monthly, and Ufitpay has a $2,000 monthly limit, while Fundall has no limit.

In addition, BoldSwitch and Sendbit have a $10,000 maximum transaction limit.

Also, note that while the official and parallel exchange rates are N1,530.26 per dollar and N1,550/$, respectively, Chipper Cash FX rate is N1,714/$, and that of Eversend is N1,619, as of July 11, according to Monierate.

On charges, virtual card operators like Geegpay deduct $0.5 per dollar transaction and 0.9 percent of transaction value for non-dollar purchases, while Boldswitch offers charge-free transactions on US websites, but shopping with other foreign currencies attracts 2.5 percent of transaction value.

Furthermore, Eversend charges a fee of $0.50 per transaction, but bills a 3.5 percent fee when customers make payments via euros and pounds.

Also, Ufitpay imposes a 1.5 percent charge on each transaction on USD virtual cards

However, banks like GTBank and UBA only deduct value-added tax (VAT) on each transaction.

‘USE OF NAIRA CARD FOR FOREIGN TRANSACTIONS WON’T AFFECT OUR OPERATIONS’

BoldSwitch, a fintech startup, told TheCable that the resumption of international transactions on the naira card will not affect its operations.

“Our value proposition remains intact because many users still seek alternative platforms that provide higher transaction limits, faster access, and more flexible onboarding than traditional banks,” BoldSwitch said.

“The lifting of the suspension may provide more options for consumers, which is a good thing. However, bank-issued naira cards often come with strict limitations in terms of monthly limits, high rejection rates on global platforms, and foreign currency instability.

“Boldswitch continues to offer stability, transparency, and access to international payments without the usual friction. We expect to see more curiosity in the space but not necessarily a decline in demand for our services.”

On how the company plans to retain users amid growing competition from commercial banks, Boldswitch said it has built several infrastructures to enhance user experience, including AI-powered features tailored to users’ needs.

“We are also developing more business-focused solutions for in-store and creator payments that banks currently do not provide. In essence, we’re not just providing financial services; we’re building a modern digital finance ecosystem designed for the realities of young Africans and the diaspora,” the company said.

Also speaking, Cardtonic, a digital exchange platform, also said it is a positive development because Nigerians should not be restricted from making international payments and purchases “because they are Nigerians”.

The company, however, said it is still assessing the situation.

‘IMPACT WILL BE LIMITED’

Commenting on the development, Ayokunle Olubunmi, head of financial institutions ratings at Agusto & Co., said that after banks halted naira transactions on dollar cards, most users switched to using the lenders’ dollar cards.

As such, Olubunmi noted that the impact on fintechs may be limited, given that the customer base they acquired during the period remains relatively small.

Also, he said the banks that recently lifted the suspension on dollar transactions for naira debit cards “still had a limit”.

Unlike in the past, when service users had a very high limit and could carry out a wide range of transactions, Olubunmi said the current allowable spend remains relatively restrictive.

“Although it is better than zero, it is nowhere near where we used to be,” he said.

“Some of the fintechs might see a decline in their transactions, but people might still prefer to use the fintech.”

Olubunmi added that fintechs’ business model means “if one area is not working, they can pivot into something else”.

Speaking further, Olubunmi said there are more areas where fintechs and banks can collaborate than compete.

“The fintechs cannot really compete with the banks because they do not have as many funds as the banks, especially for domiciliary accounts. They do not have it as much as the banks do,” he said.

“For most fintechs, it is either they pivot into other things or find a way of collaborating with the banks.”

Also commenting, Charles Abuede, research analyst at Cowry Asset Management Limited, said the new development signals growing confidence in the FX market and improved liquidity within the banking system.

Abuede added that the policy shift may also be a deliberate strategy to attract more FX inflows — especially from remittances — by boosting confidence in the system and improving access to global payments.