How will exchange rate reforms affect fintech companies?

Key questions this article answers:

Earlier this year, many local banks suspended international payments on naira cards. What alternatives emerged for consumers to pay foreign vendors, such as streaming services, gaming platforms, online courses etc?
The impact of the new exchange rate reforms FX reforms on banks has received much attention in public discourse, but how will the new exchange rate reforms affect cross-border payment startups that also provide FX trading services to consumers and businesses?

Will naira cards start working on foreign platforms again?

Six months ago, many of us woke up to emails from our banks informing us that our bank cards were basically useless on foreign platforms like Apple Music, YouTube, EA Sports, Facebook Ads etc. Essentially, we had money but no money at the same time.

Since the Central Bank of Nigeria (CBN) insisted on tightly controlling access to the foreign exchange market to compensate for dwindling foreign currency supply, banks have frequently imposed stifling dollar rations on customers. It was bad enough when banks capped monthly dollar spending limits at $100-$300 in 2020 but bordered on ridiculous when they slashed limits to $20 barely two years later. By early 2023, commercial banks suspended international transactions on naira cards altogether.

The recent FX reforms have left many clamouring for banks to lift the ban on international payments on their naira cards. After all, a unified exchange market should attract foreign exchange (FX) liquidity into the country and replenish our FX reserves. But as my colleague, Gbemi, explained in Monday’s article, the CBN must make more structural adjustments to make this monetary policy work.

Nonetheless, while these new exchange rate reforms have been celebrated in many quarters, not everyone may be elated by this news—least of all cross-border fintechs. Over the past few months, startups like Payday, Grey Finance, Chipper Cash, Afriex etc., seized the opportunity to push their 'virtual dollar cards' as the perfect substitute for international payments. If banks start offering us dollars again, will these startups lose their appeal? This article explores the possible implications of the new exchange reforms on cross-border payment services offered by banks and fintechs.