I noted a few days ago that Stripe, a U.S. fintech company, has gone into lending, mainly to companies in its ecosystem. It will use data it has on the companies to make the loans. Data-based lending is the future of lending across all nexus of modern financial services.
Stripe is looking for growth and to drive that it wants to fund companies in its ecosystem. So, the U.S. paytech firm will be making loans to companies that use Stripe. I think this is an easy matter since Stripe has data to drive this lending. Companies like Flutterwave and Paystack in Nigeria must take note of this model and see how they can enable disintermediation of the banking institution by providing capital to their more promising platform companies. You wager where you eat.
But it seems that the company is not stopping there – it is now offering credit card services with no interest or fees because the corporate clients must pay the balance in full at month end. It could be read that Stripe will simply debit the company account with it for the balance at month end! Interest earning is not the main motivation for this product; Stripe wants to grow its interchange fee and its ecosystem transaction volume by helping its customers to grow.
Notably, users are expected to pay their balance in full each month, so for now there is no interest rate, or fee, to use the card, with Stripe making its money by way of the interchange fee that comes with every transaction using the card.
“We’re not freezing cards based on late or no payments,” Cristina Cordova, the business lead overseeing the launch, said in an interview. “A pretty common reason for non-payment is that a person switched bank accounts and forgot to update the information. But we think we’ll have fewer problems because we have banking information for accepting revenue, by way of our payments business.”
This is an evolution – if Stripe processes your payment and gives you credit card, your bank has lost another business from you. Credit card is a short-term lending!
I do think Nigerian fintechs like Flutterwave and Paystack could have a path into corporate credit card business in Nigeria by exploring a similar model. Of course credit card business is monthly lending where if you do not pay off the balance at month end, interest will kick in. With data on the companies in their ecosystems (they handle their transactions), these Nigerian fintechs can manage the associated risks more effectively.
Largely, I do think Nigeria will see corporate credit card evolution before personal credit card since getting comprehensive data on companies remain easier than people. Fintechs with better data will take the lead. Yes, the debit cards will begin to show credit cards.
The credit card business in Nigeria is still at infancy