Flutterwave, Eversend and other African fintech startups discontinue virtual card services

Many African fintech firms that provide virtual dollar card services informed their customers through email on Friday that their services would be discontinued effective on Saturday, July 16, 2022. 

Flutterwave, a Nigerian-based unicorn, informed Barter users in an email that all its Virtual Dollar cards would be unusable for any payments and purchases as of Sunday, July 17, 2022.  It cited "an update from the company's card partner" as the cause of this cancellation. 

This means that Nigerians who use such services won't be able to make online transactions or purchases using the Barter virtual currency card. Furthermore, they won't be able to fund virtual cards that are already in use because the balance on those cards would be credited to consumers' payment accounts when they are cancelled.

In November 2018, Flutterwave created Barter as a payment solution to enable customers to move money to and from Africa for nothing. Additionally, the program made it easy and hassle-free to pay bills, receive money from abroad, and generate virtual cards for online shopping.

Many other startups that use Flutterwave to offer virtual cards to their consumers are likely to be impacted by this announcement.

Similar alerts were also published by other financial businesses, such as the Ugandan Eversend, the crypto exchange Busha, and Payday with its headquarters in Rwanda.

The "card partner" that these fintech companies are referring to is unclear, but they have all issued virtual cards that are supported by MasterCard and Visa—two of the biggest worldwide card issuers. 

The closure of 56 bank accounts owned by seven different companies was mandated by a Kenyan court after the Asset Recovery Agency notified the court that the suspicious accounts were used as channels for financial fraud while pretending to be merchant accounts. The news of the virtual card suspension comes in the wake of the Kenyan court's order.

Flutterwave has denied the allegations and asserted that it has supporting evidence for its claims.

Investigations into the bank account activities, however, turned up questionable activity, including the possibility that money was being received from specific foreign corporations, the ARA claims. The money was subsequently transferred to related accounts rather than being paid out to merchants.

Flutterwave responded by stating that it had a duty to safeguard the environment's integrity and that it was committed to working with all stakeholders to do so. It declared that it was working to make the data transparent and ascertain the cause of the false claims.

‘What customers are saying’

Individuals and businesses impacted by the unexpected decision took to social media to express their displeasure at the broad cancellation of virtual card services on the continent.

“It affects us in a big way because all our Facebook ads are connected to our Barter virtual card,” Douglas Kenydson CEO Selar said. “Our Amazon web services (AWS) plan is also connected, and you can’t even afford to miss one payment, or else they’ll take you off.”

Kendyson expressed doubt on the banks in Nigeria's switch to the current virtual cards. He complained about having to exchange money and possibly dealing with declined credit card payments. The best course of action for him is to use the virtual card services of Mercury, a digital bank for startups based in San Francisco that in March blocked the accounts of dozens of African startups.