Payments in Nigeria: understanding card transactions

Have you ever wondered what goes on behind the scenes when you make a card payment? If you haven't, you are about to find out 😁

Let’s start with the basics:

  1. There are 22 commercial banks in Nigeria.

  2. A commercial bank is a financial institution that performs several functions, including accepting cash deposits, doling out loans, issuing cards, and offering essential financial services.

  3. Visa and Mastercard are the most commonly used card networks in Nigeria. American Express and Discover cards are accepted but rarely used.

  4. Interswitch’s Verve also issues cards to Nigerians through their banks.

  5. Nigerian banks do not own Visa or Mastercard.

  6. A payment processor handles transactions between a business (merchant) and a credit card holder (aka you).

  7. Flutterwave and Paystack process local payments in Nigeria and in other African countries.

  8. An acquiring bank* processes payments on behalf of a business (merchant*)

Moving swiftly along…

ICYMI: Spotify officially launched in Nigeria a few days ago. Finally!

The better part of this news is that Spotify’s Nigerian customers can pay for their subscription using their Naira debit & credit cards. #thankyoublackJesus

Spotify’s ability to process local card payments is a big freaking deal, but Spotify isn’t doing the actual grunt work. Adyen and Cellulant are the two payment companies making it possible for Nigerians to keep and create Spotify accounts.


Let’s geek out…

Every time you whip out your card to make an online payment, your bank, the merchant, and a payment processor get into a polyamorous relationship. If all three parties aren’t correctly aligned, there’s a high chance your transaction will fail at the checkout page.

Curious to know what happens behind the scenes of a seemingly simple card transaction, here’s what you need to know:

  1. Inputting your card details: the beautiful payment modal that pops is powered by either a bank (GT pay), financial institution (Rave by Flutterwave), or a payment processor ( Paystack).

  2. Processing your card transaction: the merchant (Spotify in this case) passes your card information through their payment gateway (Cellulant). The payment gateway, in turn, sends your transaction to the merchant’s payment processor (Adyen).

  3. Processing your card information: the payment processor then calls up the card association (Mastercard or Visa) and securely hands over your transaction to them. The card association links up with your bank (GTB, Access Bank, etc.) and sharply asks if you have enough money in your account to cover the cost of your subscription. They also run a quick fraud check (this is why you are asked to input an OTP or four-digit verified-by-visa pin after the checkout page).

  4. Your bank's role: if you have enough money, your bank responds to the card association & approves the transaction. If your balance is low or you don’t pass the fraud check, the transaction is declined. The card association (Mastercard) runs back to the payment processor (Adyen) to let them know how far (i.e., was your transaction approved or declined?).

  5. The final act: The payment processor spills the transaction tea to the payment gateway (Cellulant). The gateway reports back to you and the merchant (Spotify) and brings the transaction to a close.


So, there you have it. Now you have a basic understanding of what goes on behind the scenes. I’ve done my good deed for the day.

Thanks for stopping by my Substack!

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