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Launching Open Banking in Nigeria to Open the Economy

More and more countries around the world are striving to adopt open banking standards. The pace and advancement vary per region, but the need to go beyond regulations and have a better understanding of the market to unlock new opportunities is consistently a necessity across the globe.

Fintech and mobile banking organizations already improved financial services in Africa by developing affordable mobile payment solutions. Open banking holds an even broader promise for African consumers (more than 70 percent of whom don’t have access to traditional financial services) and for the several start-ups that have been funded to build open banking infrastructure.

Though few countries have formalized open banking guidelines, there are promising developments particularly in Kenya, Rwanda and in Africa’s largest economy, Nigeria.

Nigeria is home to an active fintech community and is making particularly remarkable strides. The open banking initiative is largely driven by the Central Bank of Nigeria (CBN) because of its desire to get banking services to more Nigerians. CBN, in line with its mandate to promote financial stability in Nigeria, issued a regulatory framework for financial data sharing in early 2021, while further work is being done by Open Banking Nigeria. Open Banking Nigeria is a private initiative whose mission is to build a common standard for open banking Application Programming Interface (API) in Nigeria.

Open banking is one of the most important regulations to come to banking in the last decade, and in Nigeria, it will be a gamechanger. The CBN is creating a regulatory framework, which means that Nigeria will become Africa’s open banking pioneer. The important thing about the framework is that it establishes principles for data sharing across the banking and payments ecosystem. It stipulates, among other things, access requirements, principles for API, data, technical design and information security specifications.

With the open banking initiative, banks will be able to share data with other third parties thereby giving third-party providers access to customer transaction data so they can create new and interesting products. These new products have the potential to be made available by financial providers with reach in less populated areas to contribute to greater financial inclusion for most unbanked Nigerians, which was estimated to be approximately 55 percent in 2020.

Open banking also comes with its own challenges, one of which being the security concerns that come with data sharing. As stated in the CBN Open Banking Framework, certain regulations were set in place in order to address this particular risk and many others. The CBN has created four different categories of services for third parties that need data as well as particular risk ratings associated with each of those categories.

The four service categories identified are Product Information and Service Touchpoints (PIST), Market Insight Transactions (MIT), Personal Information and Financial Transactions (PIFT) and Profile, Analytics and Scoring Transaction (PAST). HID Global offers consumer authentication solutions to address all those categories.

HID Global powers the trusted identities of the world’s people, places and things, and we are willing to partner with regulators, financial institutions such as banks as well as third parties to provide strong authentication as required in the guideline on information security specifications for the open banking framework.

Want to learn more about open banking around the world? Take a look at this eBook that explains how going beyond regulations is required to stay ahead.

Emmanuel Orororo is the Sales Manager of IAM Consumer Authentication for the Sub-Saharan African region. He has vast experience in the financial services sector and regulatory matters. In the past Emmanuel has worked with various software integrators and therefore has a great level of insight into core financial solutions which includes identity verification, consumer & employee authentication for 2FA & MFA, fraud and risk management fraud detection and prevention. He is also well versed in core banking systems, loan origination solutions and API management.