Last week, the Nigerian fintech Carbon announced the discontinuation of its debit card operations, effective June 19th. The move, initially disclosed via email to cardholders, raised questions about the reasons behind the decision and the broader implications for the Nigerian fintech ecosystem.
Carbon’s CEO, Chijioke Dozie, didn’t mince words in questioning the industry’s widespread pursuit of debit card offerings. He emphasized the need for meticulous financial analysis before venturing into this space, highlighting the “scoop” mentality prevalent in the startup scene, where decisions are often driven by hype rather than sound financial reasoning.
Dozie’s concerns are echoed by industry analysts who see debit card operations as entailing high fixed costs, intricate regulatory requirements, and technological demands. For Nigerian neobanks like Carbon, these challenges are compounded by the country’s economic volatility and relatively low consumer disposable income.
Operating debit cards involves significant expenses, including costs for card issuance, transaction processing, fraud prevention, and customer service. Moreover, the return on investment in such operations can be limited, given the low transaction volumes compared to Western markets where card usage is more entrenched. Carbon’s decision to discontinue its card operations may reflect these challenges.
Djamo’s Differentiated Strategy: A Card-First Approach Tailored to the Ivorian Market
In stark contrast to Carbon’s experience, Djamo, an Ivorian fintech, has taken a different approach by focusing on providing value-added services rather than just card issuance.
Launched in Côte d’Ivoire in 2020 by Regis Bamba and Hassan Bourgi, Djamo offers a comprehensive suite of financial services, including a Visa-powered debit card. Unlike Carbon, Djamo charges no fees for top-ups, card payments, or transfers within certain limits. It generates revenue through a tiered service model, with a premium plan costing around $4 per month for higher transaction limits.
Co-founder Hassan Bourgi attributes Djamo’s success to several factors. Firstly, the company strategically partnered with local banks to navigate regulatory hurdles and issue “local” cards, which are more readily accepted by merchants and consumers.
“We needed to issue ‘local’ cards connected to a local banking institution because most merchants have fraud algorithms that are more inclined to accept local cards than foreign ones. Partnering with a non-local or foreign bank could negatively impact card success rates, which is detrimental to customer experience, particularly if the card is your star product,” Bourgi explained in a recent interview.
Djamo focused on the “bank ready” segment of the population — young urban Ivorians eager to adopt digital financial services but underserved by traditional banks.
“We target urbanites rather than the masses because the latter is well-served by mobile money. We don’t see any additional value we can bring them as of now. Simplifying the banking pyramid, it can be divided into three: the banked, the underserved, and the ‘bank ready’. We target this last segment, estimating 25 million people in the region who need their first proper bank account,” Bourgi said.
Djamo’s tiered pricing strategies allow the company to acquire customers rapidly and gradually monetize them through value-added services. Today, Djamo has more than 1.2 million users in Côte d’Ivoire alone (up from 500,000 when it raised funds in November 2022) and nearly 30 resellers of its products across Abidjan.
The Path Forward: A Hybrid Approach?
The experiences of Carbon and Djamo suggest that a hybrid approach may be the most viable path for Nigerian fintech startups. While debit cards can be a valuable tool for customer acquisition and retention, they should not be the sole focus.
African fintech startups may explore a multi-pronged strategy that combines debit cards with other financial products and services such as savings accounts, investment options, and credit facilities. This diversified approach can cater to a broader range of customer needs and ensure multiple revenue streams.
Collaboration between fintech startups, traditional banks, and mobile money operators can also be a game-changer. By leveraging each other’s strengths and expertise, these players can create a more inclusive and accessible financial ecosystem.
“We are partners with mobile money operators who give us and other fintechs access to their infrastructure to carry out our business. Since its creation, Djamo has worked in collaboration with traditional banks, helping them reach segments they can’t or don’t want to reach,” noted Bamba. “Our main sources of revenue come from subscriptions to the premium plan, and we hope that more and more customers will subscribe to it in the future, thanks to the trust we’ll build up with them as a result of the more appropriate and high-quality services we’ll be offering them,” Régis Bamba, Djamo’s co-founder stated.
What Does the Future of Debit Cards Look Like for Nigerian Fintechs?
The debit card debate is just one aspect of the broader conversation about the future of financial services within the Nigerian fintech landscape.
As startups continue to innovate and adapt, the market will likely see a variety of approaches to debit card offerings. Some companies may choose to follow Djamo’s lead and prioritize cards, while others may opt for a more diversified approach.
Ultimately, the success of any debit card deployment by fintech startups in Nigeria will depend on their ability to understand and cater to the unique needs of the Nigerian consumer. By embracing innovation, collaboration, and a customer-centric approach, startups can unlock the vast potential of the Nigerian market and drive financial inclusion.
