The Central Bank of Nigeria (CBN) on Wednesday, 8 March 2023, issued operational guidelines for open banking in Nigeria. According to the circular referenced: PSM/DIR/PUB/CIR/001/043, dated March 7, 2023, and signed by Musa Jimoh, Director of Payment Services Management, the adoption of Open Banking in Nigeria will foster customer permissioned data between banks and third-party firms to enable the building of customer-focused products and services.
The letter dated March 7, 2023, will set the tone for the banking industry and encourage new forms of collaboration and competition.
As a result, open banking recognises the ownership and control of data by customers of financial and non-financial services, and their right to grant authorisations to service providers for the purpose of accessing innovative financial products and services.
Open Banking applicability includes agency banking, financial inclusion, Know your customer (KYC), credit scoring/rating, among others. It was designed for all deposit money banks, microfinance banks, and other financial institutions.
The advent of Open Banking has opened up exciting possibilities for fintech innovation. This practice enables banks to share customer data with third-party service providers such as fintechs and mobile money operators, who can then leverage this information to create innovative solutions that benefit consumers. The regulation will pave the way for a more streamlined and interoperable financial system, allowing for the development of new financial applications with access to customer data that will expand financial inclusion and provide custom loans.
As explained in Open Banking blog, the project is backed by individuals with extensive industry experience and passion to simplify and transform payments in Nigeria.
Early backers of open banking in Nigeria includes but not limited to Sterling Bank, KPMG, PwC, EY, Paystack, Teamapt, Wallet Africa, and OnePipe. The coalition now expanded to include the likes of Mono, Switch, Lendsqr, Palmpay, Carbon, and Trium.
The open banking regulation in Nigeria was initially proposed in 2017 when industry experts formed Open Banking Nigeria. In 2021, the Central Bank of Nigeria (CBN) released a regulatory framework for open banking. That led to the creation of an industry committee that developed the draft of the open banking regulation in 2022.
Now that the regulation is in place, the CBN will establish a registry while financial institutions can leverage the regulations to build new financial solutions.
