While open banking has the potential to revolutionise the Nigerian banking industry, some of the essential infrastructure needed for it to thrive is still lacking. This article provides a comprehensive overview of open banking in Nigeria and the risks and opportunities that it presents.
The financial services and products offered in Nigeria have changed significantly in recent years as a result of scientific and technological innovation and ever-evolving consumer behaviour and needs. In turn, this has resulted in a proliferation of new fintech companies. Due to the value of the fintech sector and the impact that fintech companies and products have had on society, financial services regulators have been left to determine how best to regulate this industry.
In a bid to promote a sound financial system and enhance access to financial services for low-income earners and the unbanked segments of the Nigerian population, the Central Bank of Nigeria recently issued the Guidelines for Licensing and Regulation of Payment Service Banks (PSBs) in Nigeria. The main objective of establishing PSBs is to enable high-volume, low-value transactions in remittance, micro-saving and withdrawal services in a secured technology-driven environment.
In view of the increasing focus on cybersecurity worldwide and the rise in cyber threats both in and outside Nigeria, the Central Bank of Nigeria recently issued a draft risk-based framework and guidelines on cybersecurity for deposit money banks and payment service providers. The draft guidelines aim to complement and build on the Cybercrimes (Prohibition, Prevention) Act 2015 by promoting cybersecurity and protecting computer systems and networks and electronic communications.
The National Assembly is considering three bills to repeal and re-enact the key pieces of legislation that regulate the banking sector. Collectively, the bills provide for an increase in the Central Bank of Nigeria's autonomy and discretionary powers, an expansion of the banking regulation regime to accommodate electronic transactions and increased penalties for infractions, including the imposition of personal liability on bank officers and directors.