Playing cards

The Central Bank of Nigeria (CBN) on 26 January unveiled and officially launched the country’s domestic card scheme, which is expected to…

The Central Bank of Nigeria (CBN) on 26 January unveiled and officially launched the country’s domestic card scheme, which is expected to ensure a thriving and competitive payment landscape in Nigeria, and rival global behemoths Visa and Mastercard as well as local operator Verve, which dominate the Nigerian market. CBN Governor Godwin Emefiele said the Cash-less Policy, which commenced in 2012, aims at deepening the usage of electronic platforms in Nigeria, adding that the CBN has deliberately collaborated with relevant stakeholders to enhance the national payments infrastructure through initiatives such as the Bank Verification Number (BVN), Real Time Gross Settlement System (RTGS), Shared Agent Network Facility (SANEF), Regulatory Sandbox, Open banking and the eNaira, etc.

According to Statista, Verve, owned and run by Interswitch, was the most used card in 2019 (65 percent) and 2020 (38 percent) for e-commerce and POS transactions in the country. The figures for Mastercard and Visa in the same period were 17 and 37 percent, and 19 and 24 percent, respectively. These global companies provide central payment networks linked to debit and credit cards to enable and facilitate cash transactions with the card. The cards can then be issued to customers by banks, financial institutions, or shopping malls. With the help of AfriGo, the CBN, in partnership with the Nigeria Inter-Bank Settlement System (owned by the regulator in conjunction with Nigerian banks), is positioning itself to disrupt and possibly dominate a fast-growing market. Countries’ usage of domestic card schemes isn’t entirely new. With the CBN scheme, Nigeria will join China, Russia, India and Turkey in launching a domestic card scheme. In India, RuPay, the government-backed card payment scheme, dominates the card market owing to its efficiency, relatively low cost and policy backing. To date, more than 600 million RuPay cards have been issued. Concerns remain nonetheless. Sustainability and the ability to withstand competition from international card brands remain major challenges despite the advantages of domestic card schemes. Countries like Finland, Ireland, Luxembourg, the Netherlands and the UK had, at some point, had domestic card schemes that were gradually phased out. While the domestic card scheme should be a welcome development, Nigerians, using Verve as a case study, will typically tilt towards using a card that can carry out both local and international transactions. According to Mr Emefiele, many Nigerians are still excluded despite the penetration of card payments in Nigeria over the years. The CBN boss stated that the challenges that have limited the inclusion of Nigerians include the high cost of card services due to foreign exchange requirements of international card schemes and the failure of existing card products to address local peculiarities of the Nigerian market. With the annual value of card transactions in the Nigerian cards and payments market exceeding $18 billion in 2021, it is a substantial market for industry players. There is another concern. The CBN launching a card scheme is akin to launching a competitor to the banks it regulates. It is a conflict of interest for CBN to be the regulator that issues licences to schemes and the players in the card issuance and acceptance value chain while also becoming an operator in the same space. Furthermore, the CBN is not particularly engendering trust with many operators and the general public with its recent policymaking efforts, particularly in light of the adverse impact of its recent naira thrust. In its single-minded pursuit of its vaunted cashless policy, most of the regulator’s interventions have been received cooly, or in the case of the new banknote rollout, spectacularly blown up in its face. The regulator’s role should be limited to setting the standards, issuing and supervising the licences and applying sanctions where necessary. It also does not introduce any new utility that the domestic Verve Card scheme, which it regulates, doesn’t have. It is a signal to industry players to hold on making investments in the space since their investments can suddenly become a case of competitors against the regulator.