Carbon shuts down debit card operations in Nigeria

Nigerian digital lender Carbon has made a surprising move, shutting down its debit card operations just two years after its launch.

In a candid Substack post titled “The Scoop on Debit Cards,” Carbon’s co-founder and CEO, Ngozi Dozie, shed light on the rationale behind the decision and offered valuable insights for other fintech startups.

Dozie, while not explicitly stating the reasons for the closure, offered several insights that paint a picture of a strategic misstep. Firstly, the high cost associated with running a dollar-denominated card service in a market saturated with debit cards emerged as a key factor.

Dozie’s Carbon post is more of a self-evaluation

Dozie’s post delves beyond a simple announcement, instead revealing a critical self-evaluation and a call for a more measured approach in the fintech space. He acknowledged this in his post, questioning the prevailing trend of neo-banks entering the debit card space:

When I take a step back with the benefit of hindsight (and a card operation bill denominated in USD$), I question why practically all neobanks are pushing cards or even getting into it. Was this the right strategy for ALL of us, or was Carbon just unlucky?

Dozie further emphasised the importance of thorough market analysis before launching new products. He admitted that a more in-depth evaluation might have revealed the redundancy of introducing another debit card option in a market already well-served by traditional banks.

“Too many founders run on scoops at different points, and I am as guilty as the next. If I had done the analysis… and truly evaluated the opportunity, I don’t think I would have been that gung-ho about pushing a strategy to provide consumers with their fifth debit card. The decision might have been the same, but perhaps with more respect for the potential risks,” Dozie says.

“Maybe I had a scoop that if we launched a debit card, customers would trust Carbon more. Because, hey—just like those big banks you trust, I have the same bright, shiny card, marketed on billboards with happy-go-lucky youth with funky haircuts and bright clothing“, he elaborated.

This sarcastic tone conveys Dozie’s belief that some fintech startups might be pursuing debit cards as a way to build trust through brand association, rather than focusing on genuine value propositions.

His sarcastic commentary implies that some fintech startups might be prioritising brand image over genuine innovation in their quest to gain customer trust.

Dozie ends his post with a connecting story.

A few years ago, Carbon faced a pivotal decision: whether to expand its operations to Kenya. Reflecting on that moment, Dozie, shared an anecdote that highlights the indispensability of strategic foresight in business expansions and product launches.

“A few years ago, one of my competitors took me aside and said, ‘I hear Carbon is expanding to Kenya – don’t do it,’” Dozie recalled.

This competitor, already established in Kenya, seemed to imply that the market was challenging and perhaps even saturated. Despite the competitor’s warning, Carbon proceeded with its expansion. Dozie now reflects on that decision with a hint of regret, noting, “I wish we had heeded their advice.”

When Carbon introduced its debit cards in August 2021, it was described as a significant step in its evolution from being Nigeria’s largest digital lender to a microfinance bank licensed by the Central Bank of Nigeria (CBN).

“With the debit card, Carbon bank account holders will now be able to spend funds in their accounts via online and offline channels like ATMs and POS machines. More importantly, Carbon is prioritising user experience, a trending issue among customers of financial institutions”, the company stated at the time.

The launch aimed to build on Carbon’s existing customer base of 3 million users by offering a more comprehensive banking experience, catering to a variety of financial needs.