Financial technology [FinTech] companies – Opay, Palmpay, Moniepoint and Kuda – were recently barred by the Nigerian authorities, from onboarding new customers.
Yes, there was confusion over who issued the directive. Some reports claimed it came from the Office of the National Security Adviser [ONSA], others said the Central Bank of Nigeria [CBN], issued the directive.
However, the CBN Act of 2007 of the Federal Republic of Nigeria charges the apex Bank with the overall control and administration of the monetary and financial sector policies of the Federal Government. So, there is no smoke without fire.
Another confusion: What prompted the ‘order’? Yet, some sections of the media reported that the FinTechs were affected in the ongoing clamp down on ‘cryptocurrency economy of Nigeria’ that has even negatively impacted the nation’s currency – the naira.
On the other hands, words from the grapevine connected that the order for these FinTechs to temporarily halt their customer onboarding processes was linked to an ongoing audit of their Know-Your-Customer [KYC] in line with the ONSA’s scrutiny in recent months, over concerns around money laundering and terrorism financing in the country.
Heads of FinTech companies and [in banks] were summoned to Abuja to discuss issues around KYC.
Although, the CBN is yet publicly commented on the directive to the fintech firms, sources from three major FinTechs, who requested not to be mentioned as they were not permitted to speak, confirmed they have halted new account creation on their platform.
However, the source denied the directive of having anything to do with KYC.
“It’s just a regulation from the CBN, and we’ve complied. The real question is, why are FinTechs companies always targeted,” the source argued. “It has nothing to do with KYC; I am aware that the CBN communicated, but this particular issue dwells on accounts related to cryptocurrency transactions.”
The source argued that FinTechs have played significant roles in deepening financial inclusion in the country.
“We have deployed robust and reliable digital payment infrastructure that has facilitated an average monthly transaction value of $12bn for about 1.6 million businesses, just last year”, the source told our correspondent.
Also, a source at PalmPay, confirmed there was a CBN directive to FinTechs to reassess their KYC processes. This is causing a temporary pause in onboarding new customers.
She clarified that the KYC review, was a collaborative effort with the CBN, and FinTechs were awaiting further instructions without a specified timeline for resolution.
Another source at OPay, who also declined to be named, said they were following the CBN’s directive and could not comment further. “We don’t really have anything to say. It’s just a directive that we are following. The CBN has issued their directive. FinTech companies have faced increased regulatory scrutiny over their account opening processes.
The market for digital payments is huge as it includes digital trade transactions, mobile point-of-sale payments, and digital transfers.
Digital investments in the FinTech space include robo-advisors and neobrokers while digital capital raising such as crowdfunding, crowd investing, crowd lending, and marketplace lending, have been deployed to increase financial inclusion in the country.
The market for digital assets like cryptocurrencies, NFTs, and DeFi, and the neobanking segment are part of the focus areas in the digital banking space.
Nigeria plays host to a strong and growing FinTech ecosystem, a feat largely driven by an increasing smartphone penetration, and a massive unbanked population.
It is also the leader in Africa FinTech startups and mainstream banks, providing innovative digital solutions and offerings ranging from banking services, alternative lending and digital credit, public revenue collection, electronic payments, investments and financial management, blockchain, digital currency, crowdfunding and alternative financing, to foreign exchange, remittance transactions among others.
However, the EFinA Access to Finance (A2F) survey report, indicated that formal financial inclusion in Nigeria, has grown significantly from 56% in 2022 to 64% in 2023.
The 2023 results show that 26% of Nigerian are financially excluded, down from 32% in 2020, demonstrating clear progress towards the Nigeria Financial Inclusion.
It must be noted that fundamentally, achieving the financial inclusion quest of Nigeria cannot be possible without the FinTechs. Ask the ordinary man in the street of his experience during the naira scarcity saga.
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Reacting, Uju Ogubunka, the president of the Bank Customers Association of Nigeria, backed the CBN’s move to suspend new account opening on the affected platforms.
“Anything that can disrupt the system should not be permitted. If the platforms are being used for things that are against the regulations, I think the CBN decision is ok. I don’t see anything wrong with that. It behoves on the companies now to get their KYC right.
“Let them do what they are supposed to do. KYC applies to banks and other financial institutions that deposit money. It should also apply to them so that the regulators can understand what is going on and hold them accountable.”
Meanwhile, the main regulatory bodies of the FinTech sector in Nigeria include the CBN, the Nigerian Deposit Insurance Corporation (“NDIC”), the SEC, the Nigerian Communications Commission (“NCC”), the National Information Technology Agency (“NITDA”).
Others are; the National Insurance Commission (“NAICOM”), the Federal Competition and Consumer Protection Commission (“FCCPC”), the Corporate Affairs Commission (“CAC”), the Federal Inland Revenue Service (“FIRS”), the Nigeria Data Protection Commission (“NDPC”) and the National Office for Technology Acquisition and Promotion (“NOTAP”).
Yet, they the FinTech are not over-regulated?
Well, the extent of each regulator{s}’ supervisions will mostly depend on the transactions or services which the FinTech company is engaging in.
With the new order, the target may be affected, as the company processes about 100 new accounts every day.
It is thus, yet unclear, with the recent move of the apex bank, if its ambitious target to increase overall financial inclusion to 95 per cent of the adult population by 2024 will be achieved.
Time will tell.
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