The Journey to a Domestic Card Scheme.
Reasons for Indigenous card schemes and a review of previous attempts to create some in Nigeria.
The Central Bank of Nigeria in collaboration with 2 major stakeholders; Nigeria’s central switch and Bankers Committee announced the launch of a National Domestic Card Scheme early in the new year,2023.
In this article, I explore similar Card Scheme projects undertaken by private indigenous organizations in Nigeria or other national bodies around the world. This is to understand the effects of this development on the financial ecosystem in Nigeria.
For the purpose of this article, I define indigenous card schemes loosely, as organizations that have attempted a card product or program.
Some of the attempts have been done using the Visa or Mastercard payment applications, they have been highlighted in the appropriate sections.
Card scheme vs Issuing a card
It is important to distinguish between implementing a card scheme and Issuing a card. A card scheme is a super-connector in the Payments system. They define their own scheme rules, connect member financial institutions, set scheme and interchange fees and ensure compliance.
They also carry out network assessments at a fee and other things like certifications of third-party processors and tech providers.
On the other hand, Issuing a card, which a lot of Fintechs have been doing lately, is done under a card scheme in partnership with a licensed member of that card scheme. This is mandatory if the Fintech is not certified. I wrote extensively about it here.
Why an indigenous card scheme is important.
Despite the aggressive growth of digital payments in Nigeria and the proliferation of Fintechs, most transactions are still in cash. The next preferred payment method is payments cards- debit to be specific. With this background established, these are the reasons I think an indigenous card scheme is necessary.
1. A large percentage of the profit from payment transactions stays in the country as a good percentage of our consumer flows are domestic.
2. An Indigenous scheme will be focused on domestic use cases. A few Fintechs have frowned at the international card schemes’ inability to provide suitable integrations for BNPL etc, especially for use cases like Lending.
3. It will also lower the barrier to entry for domestic financial institutions. Banks pay all sorts of fees to become part of international schemes. These include Connectivity fees, Testing Fees, Membership Fees, Authorization Fees, Cross Border Fees, Specific Program enrolment Fees, and of course, interchange fees. An indigenous card scheme can choose to waive these as RuPay did.
4. Overcoming dependence on international rails which might be a tool for sanctions. We all know Russia’s story. Point made.
How Indigenous cards have performed around the world.
1. China Union Pay (CUP ) started as a domestic scheme in China but is now doing well globally. It is issued in 70 countries and accepted by 55 million merchants competing with the incumbents, Visa and Mastercard.
2. RuPay is a proprietary card payment solution operated by the National Payments Corporation of India (NPCI). So far, NPCI has issued 714 million RuPay cards that have facilitated more than 1.3 billion transactions.
Previous attempts at Indigenous cards in Nigeria.
Here we explore our history. A lot has been done to create successful card products in the past, but quite a lot has been discontinued. I attempt a summary below. If I have left out any, please drop it in the comments.
1. Vpay card by Valucard
- Created when: 2004
- Card Payment Application — co-branded EMV debit solution with Visa
- Current Status: Discontinued
- Card Types: Debit
- Market Share: N/A
2. Genesis card by Etranzact
- Created when: 2010
- Card Payment Application — Mastercard
- Current Status
- Card Types
- Market Share: N/A
3. Freedom Card by 3line
- Created when: 2011
- Card Payment Application — Visa issued off the Arius platform
- Current Status: Discontinued
- Card Types: Debit
- Market Share: N/A
4.Verve card by Interswitch Group
- Created when: 2009
- Card Payment Application — CPA
- Current Status: Active
- Card Types: Verve Debit , Verve Prepaid, Verve Global
- Market Share: 38%
Other worthy mentions include the interesting work Appzone has done over the years to provide a domestic card management system. They started from the Viacard platform which a lot of OGs in e-banking will remember. Viacard was superseded by Prime also by Appzone, which reportedly could issue Mastercard successfully.
Second, on the list is Sudo Africa, a new generation Card Technology provider. They are focused on providing APIs to enable the instant issuance of physical and virtual cards.
What can we learn from the Verve card scheme?
With 13 years under their belt and over 30 million cards issued, it will be useful to analyze what has made Verve tick. Especially as they are the only organization that has offered a real card scheme, with a different card payment application — CPA.
- Technology: Verve’s Parent company Interswitch had built a lot of competence around Payments Switching Technology and Card Management systems.
- Experience: This was not their 1st attempt at a card product. They produced a successful magnetic stripe product — Cashcard as well as attempted a co-branded card with Mastercard.
- Flexibility: They also ensured they had as much control of the issuing value chain. I should unpack this in another article so this doesn’t get too long.
- Talent: All of Verve’s CEOs and senior management have had deep Technical and Business expertise in the Financial services domain.
- Some hard knocks: All has not been rosy at the scheme. Verve global — their international card program hasn’t taken off as they imagined, possibly due to FX concerns.
It’s worthwhile to mention that other organizations across Africa are looking into this opportunity. Union54 mentioned this as their next expansion focus at their last raise. With the PAPPS rails becoming operational, it appears we can look forward to a more connected continent in the next few years.
About the author: Iphie is the Founding Partner of The Paymentlogue - a platform focused on enabling a skilled Fintech Ecosystem. She can be reached on the PaymentLogue Slack community for Fintech professionals or on LinkedIn.
