A Journey of Strategic Reforms and Innovation
During the FintechNGR Quarter Two Regulators’ Forum Webinar, themed “Beyond Compliance: Unlocking Innovation with Nigeria’s Open Banking Framework,” Mr. Musa Jimoh, Director of Payments System Policy at the Central Bank of Nigeria (CBN), highlighted the pivotal role of progressive regulation, fintech innovation, and evolving consumer behavior in this remarkable evolution. Jimoh emphasized the speed and efficiency of Nigerian payment transactions, stating, "Our payments happen within seconds, and that’s a very big one for Nigeria as a country." He described this instant payment system as a testament to the nation's commitment to innovation and financial inclusion.
The journey began in 2006 with the inauguration of a national payment system vision, aimed at creating a comprehensive roadmap for development. A significant milestone occurred in 2010 when the CBN mandated a transition from magnetic stripe cards to more secure chip-and-PIN (EMV) cards, a move that vastly improved payment security and adoption.
Further regulatory interventions, such as robust Know Your Customer (KYC) protocols, the expansion of mobile and agent banking, and the implementation of a cashless policy, have propelled the ecosystem forward. Today, Nigeria boasts over 160 different licenses granted to institutions for financial and payment services, demonstrating the sector's vibrant growth. Financial institutions and switching companies have also consistently upgraded their infrastructure to manage the ever-increasing transaction volumes. The introduction of the biometric-based Bank Verification Number (BVN) was another landmark policy, ensuring secure customer identity across diverse platforms.
Mr. Musa Jimoh, Director of Payments System Policy at the Central Bank of Nigeria (CBN)
Open Banking: The Next Frontier for Financial Services
The forum also delved into the immense potential of open banking to deepen financial services and foster collaboration among institutions. Jimoh elaborated on how open banking can unlock innovation by allowing developers to create novel financial products using customer-permissioned data held by banks. He stated, "Banks are holding onto vast amounts of data that could be leveraged to develop innovative financial products and services. The CBN believes that open banking can help address this challenge by allowing developers to access bank data and create innovative financial products and services. The data must be permissioned, and the customer must give consent before it can be used."
Despite the promising outlook, challenges remain, particularly concerning the standardization of Application Programming Interfaces (APIs) and cybersecurity. To tackle these, the CBN has established specialized workstreams dedicated to resolving technical and policy issues related to open banking.
The CBN's overarching goal is to cultivate an environment where "openness, inclusiveness, and innovation drive national economic resilience and prosperity." With a robust regulatory framework, standardized APIs, and strong collaboration among stakeholders, open banking is poised to revolutionize Nigeria's financial landscape.
Commitment to Continued Progress
The Central Bank of Nigeria has underscored its unwavering commitment to collaborating with both the private sector and regulators to advance innovation and broaden access to financial services across the country. The CBN has already released comprehensive regulations and guidelines on open banking and established a regulatory sandbox to support and nurture new innovations.
This concerted effort reinforces Nigeria's position as a trailblazer in the global financial technology space, continuously striving for an inclusive and efficient payment ecosystem.