Unravelling Recent Developments in Payment Card Industry

Like other emerging markets across Africa, the payment industry has led the way with technological advancement in Nigeria. However, while several sectors of the industry have been decentralized, the card and token sector have stood out considerably, with the same key players innovating consistently to advance the sector over the years, writes Emma Okonji

In the beginning, there were no indigenous players in the Nigerian payment industry that was dominated by debit and credit cards. At that time, two foreign card schemes of international repute- Mastercard and Visa, however, recognised the opportunity in Nigeria’s developing payment sector and swiftly cemented Nigeria’s adoption of ATMs and digital payments with different variants of their cards.

The chief regulator of the sector, Central Bank of Nigeria (CBN), effectively guided their activities in Nigeria.

While these card schemes delivered value in their own way, there were obvious challenges with Nigeria’s complete dependence on international card brands to facilitate and power local payments. Costs of production and processing cards posed a challenge that actively affected the customer’s experience and expense when using the cards. The culture gap was also evident as most semi-empowered Nigerians with lower disposable cash could not relate to or afford to use these cards. Naturally, this impacted on general adoption and usage statistics, somewhat frustrating the attempt to reduce cash’s reign and engineer a new way of life that was more card or code dependent, than cash dependent.

Birth of Indigenous Card

Having envisaged the need to domesticate financial transactions through indigenous debit and credit cards, some Nigerians started thinking of ways to introduce indigenous card schemes in the Nigerian financial sector that will compete with foreign cards. It was therefore extremely remarkable and a thing of national pride when an indigenous company launched its own card scheme– Verve in Nigeria in 2011, before extending it to other African countries. It is perceived that Verve was deployed as a domestic card scheme with a broad appeal to other African countries. The birth of Verve meant that banks could now process payments card quicker, and at a lesser cost. It also meant that more people could access a card scheme that was readily available and affordable for them. The card also empowered more Nigerians-including the bottom of the pyramid- to own a card at affordable cost.

It has been over 12 years since Verve was launched in Nigeria and the card scheme has achieved several remarkable feats, further demonstrating the ability of the Central Bank of Nigeria (CBN) to regulate the industry in a sustainable manner and support local advancement. Since it is more affordable to produce and process, Verve card enjoys massive acceptance across Africa and the globe. The other card schemes are also owning their own, delivering value to the more elitist group, their major offerings revolving around international payments and cross-border shopping. The collaborative competition between the major card schemes in Nigeria has enhanced payment experience for Nigerians, and also positioned the CBN as an agency with the ability to regulate the industry in a sustainable manner while providing support for local advancement. However, the Verve card, hinged on its cost effectiveness, enjoys massive acceptance across Africa whilst leveraging strategic global partnerships.

Verve Card Extension

Having seen the growth of Verve Card in Nigerian after it was launched in 2011, Interswitch, the brain behind Verve card, took the card to East Africa, where oit was launched in Kenya in 2015. 

The launch also gave Kenyans more options when it comes to cashless payments. The leading African payment card brand launched October 29, in Nairobi, Kenya.

The launch also brought to the fore, a strategic partnership with Kenya Commercial Bank (KCB) to expand the card’s acceptance and payment services in six key East African markets – Kenya, Tanzania, Burundi, South Sudan, Rwanda and Uganda.

This was a strategic effort by the Verve brand, which is the biggest payment card brand in Nigeria with more than 30 million payment tokens, to increase its acceptance across the African continent.

Chief Executive Officer, Verve International, Charles Ifedi said: “East and West Africa are host to some of the fastest growing economies on the continent. We are also seeing rapidly expanding trade flows between the two regions, and with that increased travel.

“Expansion of Verve acceptance across Africa and around the world is part of the long-term strategic vision for our business. It will also foster closer business partnerships between East and West Africa and improve the ease of doing business on the continent, thereby encouraging even stronger growth. We have created Africa’s first truly global payment card brand and an important symbol of Africa’s economic power.”

Card Regulation

Financial analysts have said the central bank has done a great job moderating a healthy competition amongst the card schemes that has benefitted both the financial sector and customers over the years. According to them, while Mastercard and Visa have continued to promise and deliver on seamless digital payments, both locally and internationally, the foremost fully indigenous card scheme, Verve, has also consistently innovated, delivering simple and seamless payments at home, and expanding to cater to digital and web transactions as well. It has been observed that The Verve Card Scheme recently activated online payments for household platforms like Facebook, Spotify, Netflix and more. It seems like the gap is reducing, as all levels of the socio-economic class in Nigeria now have card or cardless options catering to their needs at every level.

Concerns

Raising concern over government’s regulations and policies in recent times, analysts are however of the view that the federal government’s moves in recent times, pose great concern to all. First, the unique selling point for international cards like Mastercard and Visa seemed to have been handicapped when the government directed against making international payments with Naira cards beyond $20. Some have argued that the policy seemed to have been aimed as part of the solution to the foreign exchange volatility with respect to the Naira with, perhaps, some unintended demystification of the offerings of the card giants, putting them in a precarious position. Not long after, the cashless policy was announced, startling the market, and raising several questions. While many analysts have argued that it would eventually benefit the man on the street and drive increased dependence in favour of the card schemes, others have expressed concern at the timing and purpose of it all.

The latest development may have compounded the debates and analysis some more, while seemingly complicating the situation. Partnering with the Nigeria Inter-Bank Settlement System (NIBSS), the Central Bank is set to unveil a new card scheme, in January 2023. This singular development may have triggered genuine concerns and questions about the federal government’s actions, even if their intentions and strategies were well thought out.

It is common knowledge that regulators are expected to be non-partisan, with a bird’s eye view on the industries they regulate, such that they can take objective measures to ensure sanity and progress within the industry, prioritising the economy and ordinary citizens. With the government and NIBSS set to launch a domestic card scheme, there are questions about FG’s ability to both regulate and still play in a sector it once only regulated.

There are concerns that this move could easily dissuade innovators and investors from pushing the envelope to deliver new possibilities for Nigeria.  Such innovators would wonder if at the peak of their efforts, when success becomes apparent, the country would make policies that would cannibalize their efforts unduly.

Some observers have argued that if anything, the federal government, NIBBS and Nigeria should rally round a successful indigenous card scheme like Verve to overcome the challenges combating businesses that are fully owned and driven by Nigerians, while encouraging independent new entrants to take a dive in the pool and create many more viable and beneficial alternatives for Nigerians.

If the federal government succeed with launching a card, would Nigeria’s payment sector seem like the proverbial house divided against itself? The future of Nigeria’s payment sector, among others, would to a significant degree, be dependent on the outcomes of the recent policies and plans of the government.

Some analysts, who cautioned against the plan by government and NIBSS to launch a domestic card scheme for Nigeria, advised the two regulatory bodies to consider the myriad of possibilities, both positive and otherwise, before launching the domestic card scheme.