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Why is Chipper Cash charging users for declined transactions?

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Chipper Cash said it will now charge its Nigeria users a non-refundable fee of ₦‎500 for transactions that fail due to insufficient funds on its virtual dollar and naira cards users. The fintech revealed this in a blog post on its website.

The startup said this development is because VISA, the card scheme that powers its cards, charges it for every declined transaction, adding that it makes no profits from these charges.

Fintech like Chipper Cash in recent years have stepped in with virtual cards that ease the process, albeit at unofficial exchange rates. Like every other card provider, Chipper Cash incurs a cost from the card scheme every time it facilitates a transaction. However, even failed transactions attract a fee, as Chipper Cash’s statement shows, leading to their decision to pass on those costs to consumers.

Unsurprisingly, Chipper Cash’s decision to charge users for declined transactions due to insufficient funds has drawn the ire of users, with many hinting at leaving its service.

While the reaction is hardly surprising, it again brings into focus the strategies African fintech startups use to gain new customers. Digital banks like Kuda have used perks like free transfers and its overdraft facility to entice customers. Users have also been known not to be charged the fees many commercial banks charge. So when Kuda began charging users ₦50 for deposits above ₦10,000, customers were understandably dissatisfied. This was although commercial banks in the country already did the same.


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