It was a great business model on paper: have a fintech solution that will make it possible so that when African diasporas visit their homelands like Nairobi, Lagos, Accra, etc, they can use the same credit cards they have used in America, Germany, UK, etc to pay for things!
But there is a problem: payments in our part of the world have always attracted more chargebacks*. And in sub-Saharan Africa, we have taken that to an unfortunate level with severe implications for merchants, fintechs and the broad ecosystem.
For example, a bank in East Africa which provides the API that enables some of these payments lost its partnership with a leading payment processing and issuing company because of the unusual level of chargebacks in the continent. But startups did not give up as they continued on how to serve the diaspora market.
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But what we’re reading on what happened in Nigeria in December 2024 is extremely unfortunate: some people used hotel services, restaurant services, paid with their foreign cards, and upon returning to their foreign bases called their banks that the payments were paid without their approvals.
Typically, in US, Canada and most Western European countries, the banks are expected to refund them unless the merchants can provide compelling evidence to support that they actually approved those payments.
That is how banking works there: banks are there to protect you when bad things happen. Of course, that does not include approving spending, getting services, and then wickedly asking for a refund.
This falls to the #1 challenge for fintech companies in Africa and specifically Nigeria, as I noted: ‘Good People, Nigeria should declare a financial state of emergency on “Cyberfraud, Identity Theft & Wire Fraud” in the nation. In the last three years, many fintech startups have failed, not because of market conditions, but because of this fraud vector.” Indeed, for this Detty December issue, some of the fintech companies which have facilitated these sales will see their licenses revoked by their US, Canadian and European partners, for enabling an ecosystem with more than average chargebacks.
Yet, if you are a merchant, this is your defence: always request for your customers to sign their card payments and print a copy of that payment. And any purchase above $200, ask that person for an ID and copy the last 4 digits of his or her driver’s license or passport and write on that receipt.
If you do have that copy, present it to the payment processing partner. When you do that, you will not be open to this chargeback risk as that person knows you have enough evidence to win the dispute. But where you have nothing, you could lose money.
*A chargeback is a reversal of a debit or credit card transaction. It happens when a cardholder or their bank disputes a charge and the dispute is resolved in the cardholder’s favor.
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Let us break the English down, for those who are sitting far from board and speakers. You mean Nigerians in diaspora used their credit/debit cards to make payments as they enjoyed their Detty December in Nigeria, only to return to their countries of residence and claimed that they never approved those payments? And because the banks over there don’t like stress, they will refund the money they already enjoyed over here? In that case, we have a lot of unfortunate creatures.
The common refrain is ‘leadership’, but leadership is not disconnected from the citizens, the leaders are not aliens. Is there where you have plenty bad people with great leaders? Where will these great leaders Nigerians always talk about come from – imported or from the same rotten people? If you do not have the critical mass needed to advance a society, such society stands no chance. If your bad behaviour is home and away, where else will the liberation come from?
Who are we and what do we stand for? We are being cut off from so many things because of unpleasant experiences others have had, and we still think that only few us are bad, while the rest are great people? The soul searching will need to go much deeper and wider, the economy mirrors the badness.
Lemfi just raised $53M in a Series B funding after hitting $1B in transactions- Remittance to Nigeria is their largest market. To those in the UK, I think this is a hardsell for Monzo and Revolut Cards owners, the risk is yours and you will need to prove fraudulent activities on your account. It is in the small print. The chargeback system in the US and Canada is a bit naff and to be honest still archaic. Let us call a spade a spade, if you are a IJGB who knowingly consumed a Service and you got back to base fraudulently claiming for charge back… you know what you are. It’s that simple.