Recharge cards business fizzling as fintechs, banks take control

The recharge card business in Nigeria is declining as people increasingly opt for digital methods to purchase airtime, such as through mobile apps provided by banks and fintech companies.

Aside from the roadside sellers, licensed Value-Added Services (VAS) providers in the telecom industry are also hit by this shift.

However, despite the challenges, opportunities for new businesses and agents are emerging in the digital landscape, creating potential win-win scenarios for all stakeholders.

From her usual spot at Abu-Alfred Street in the Ogba area of Lagos, Mrs. Judith was conveniently making at least N3,000 profit in a day while sitting under her MTN-branded umbrella.

But that has now become a story of the past.

Now, she hardly sells recharge cards worth N1,000 a day. People are no longer buying recharge cards as before, but they haven’t stopped making calls and subscribing for data.

For her, what started as declining sales at the beginning of last year reached its crescendo early this year when it became very difficult to sell.

She thought it was a problem peculiar to her area until recently when she met another recharge card seller from the Ojota area, who complained about the same issue. The only option left now, according to her, is to shift to PoS business.

“From what I heard; people are now buying their recharge cards from their banks. This is killing us as small businesses. I now struggle to sell N1,000 a day. The N20,000 cards that I used to sell in less than 2 days before is what I have been selling for almost a month now. Once I’m able to raise enough money, I am switching to PoS machine, because this is no longer a business one can survive on."

The story was not different for Miss Folashade, an HND holder who has been running a recharge card business for about 10 years at her Agege Pen Cinema area of Lagos.

But she was smart enough to start the PoS business alongside the card business two years ago when she realized sales were not as good as they used to be.

“Before there were people that I knew as my regular customers. Some of them would come and buy up to N5,000 recharge cards. But now I hardly see any of them. Those who are my neighbours that I have confronted told me they now buy from their apps.

“I can’t force them to buy from me when they can easily buy from the comfort of their homes without even looking for cash to buy. I believe an end is gradually coming to physical cards in Nigeria because right now, only the people without bank accounts are buying cards” she said.

Cash crunch factor

The impact of airtime top-up services offered by banks and fintech companies on recharge card sellers has been felt for several years.

However, the situation escalated early this year when Nigeria experienced a cash shortage due to the Central Bank’s policy on Naira redesign.

It was then that many Nigerians realized they could conveniently purchase airtime through mobile apps, and since then, they haven’t looked back.

The ease and convenience of buying airtime online, coupled with the risk of losing paper recharge cards if left unused, have made digital purchases more attractive. Samuel Abifarin, a student at Lagos State University, shared his perspective:

“From my app, I can recharge my phone anywhere, anytime, even in the middle of the night. I don’t need to search for N100 or N200 in change to buy airtime. In fact, I can buy N50 airtime if I don’t have enough in my account balance. You can’t get that from a shop.”

Telecom VAS providers lament

Recharge card sellers are not the only ones affected by banks’ intrusion into the airtime vending industry. Value Added Services (VAS) providers licensed by the Nigerian Communications Commission (NCC) are also expressing their concerns that banks are encroaching on their territory.

Chijioke Ezeh, the President of the Wireless Service Providers Association of Nigeria (WASPAN), the umbrella body of telecom VAS providers, voiced his apprehension that soon only banks and fintechs may be left in the recharge card business.

“I can’t remember when I last saw people selling recharge cards on the street; the banks have taken over and tied it to our bank accounts. They have eliminated the small recharge card sellers, leaving the dealers at their mercy. With what’s happening, the recharge card business will soon fade away,” he lamented.
Ezeh argued that banks should not be allowed to sell airtime through their ATMs or USSD codes, as they do not contribute to the networks they profit from. He said:

“Banks are not supposed to sell recharge cards because, originally, that was not part of their licensing. They are merely extracting value from the telecommunications sector without contributing.

“When they came to the NCC to ask for a shortcode, it was not for recharge card, it was so that people would check their balance. From there, they started selling recharge cards and every other service that the VAS providers are licensed for.”

A win-win for all?

According to an official of one of the telecom companies, who would not want to be quoted because he was not authorized to speak with the media, the era of physical recharge card vending may be coming to an end gradually, but it could also be a win-win for all.

“The beauty of technology is that it keeps creating new opportunities even as some are being taken away. The arrival of telecommunications services in Nigeria created a number of business opportunities for Nigerians across the value chain. The recharge card business is one of them.

“And now that the technology has advanced to such a level that people no longer need to be searching for physical papers as recharge cards, the operators are saving costs of printing while new businesses are being created for the people in different areas.

"For instance, with PSB licenses, all mobile network operators are now providing financial services as well. They are onboarding thousands of agents across the country to provide financial services, through which they can also vend airtime and data. So, it is a win-win for all. People who have been selling recharge cards before now should consider becoming agents to the telecom operators.
Through this, they will be doing more than selling data and airtime and will be making more money,” he added.

Fintechs snatching the market from banks
While small businesses have lost their grip on the telecom business, a battle is unfolding between fintech companies and banks for the lion’s share of telecom subscribers in airtime top-up services.

Banks’ virtual top-ups through their mobile apps are free, unlike other services, which was initially a motivation for bank customers to continue buying from their apps.

However, fintechs are now enticing customers with attractive offers, such as cashback programs and discounts, making them the preferred choice for subscribers.

Some fintech apps offer a 3% discount, selling N1,000 airtime at N970, while others provide percentage cashback on every airtime purchase.