Grace Ashiru
Nigerian investment startup Rise has announced that it will discontinue its virtual card services, citing the unique challenges associated with offering such services in Nigeria. The fintech company has confirmed that the service will officially end on September 30, 2024. This move follows a similar decision by another Nigerian digital bank, Carbon, which discontinued its debit card services in June 2024, stating that the service was initially launched for the wrong reasons.
Rise recently informed users via email that its virtual card service had encountered several challenges, including issues with providers, fluctuating exchange rates, and delays in resolving problems. This isn’t the first time a fintech company has experienced difficulties with offering virtual card services. In 2022, Union54, a virtual card provider, had to suspend its services after suffering losses due to chargeback fraud.
Other fintech companies that didn’t suspend their card services had to implement significant changes to how they offered them. For example, in 2023, Payday, which was acquired by Bitmama, informed users that their cards would be terminated if transactions were declined due to insufficient funds.
Chipper Cash recently announced that it would introduce a ₦500 non-refundable fee for transactions declined due to insufficient funds.
In a separate development, Carbon, a Nigerian digital bank, has also decided to discontinue its debit cards. Although no official reason was provided for this decision, CEO Ngozi Dozie reflected on the matter, stating, “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?”
Addressing the challenges faced by Nigerian fintech startups with virtual cards, Tunde Adewole, Co-Founder and CEO of Bridgecard, pointed out that card schemes like Mastercard and VISA impose a chargeback rate of around 1%. They also charge fees for declined transactions, ranging from $20 to $100.
Unfortunately, fintech companies often face chargeback fraud rates exceeding 1%, in addition to the costs associated with declined transaction fees.
For Carbon, the decision to end its debit card service has been speculated to be driven by the high costs of maintaining debit cards.
