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FinTechs belonging to this area offer traditional banking services in a modern way, usually through online services or mobile applications as well as ancillary services – e.g. enabling customers to manage their giro- or custody-accounts online and in real time or offering e-wallet services. Keywords in this context are also API-Banking or Banking as a Service (BaaS)/ Bank as a Platform (BaaP).
API-Banking:
API stands for application programming interface and is offered to access data banks and to extract and insert information. API-Banking consequently means the access to data banks of banks to offer new and innovative banking applications.
Through these services FinTechs offer services with new functions, e.g. enabling customers to manage their accounts online and in real time.
BaaS – Bank as a Service/BaaP – Bank as a Platform:
The API-based Bank as a Service platform has a full banking licence, but merely serves as the back end for standalone independent FinTechs, which “use” the licence and the back end of the bank to offer new financial services, launch additional financial products or expand into additional markets.
Introduction
Attitude of the country towards online-banking services
Online-banking services in Nigeria has become a much acceptable banking system in the country. The COVID-19 pandemic lockdown was one of the factors that bolstered the adoption of mobile and online banking platforms by practically, all banks in Nigeria. Individuals, having been compelled to adhere to remote interactions, were more willing to use the online banking systems provided by their traditional banks.
The rise of online banking services was also influenced by the naira cash scarcity due to the redesigning of the naira early 2023. There is also an ongoing increase in the number of Fintech companies offering virtual bank accounts. For this category of financial service providers, the existing laws and guidelines applicable to traditional banks also apply, especially regarding consumer protection, data privacy and protection, cybersecurity, anti-money laundering and minimum capital requirements. The CBN is the apex regulator of this sector. The CBN, in furtherance of its mandate to promote innovation and competition in the banking system released the Regulatory Framework for Open Banking in Nigeria (the “Framework”). Further to the Framework, the industry has commenced the process of implementing the standards to be used by all participants. This will significantly facilitate increased data accessibility and collaboration between traditional banks and Fintech stakeholders. In 2023, the CBN further issued an Operational Guideline for Open Banking.
Recently, the CBN enhanced the existing know-your-customer framework to strengthen compliance with anti-money laundering and counter-terrorism financing provisions by establishing the Customer Due Diligence Regulations, 2023 (“CDDR”). In line with the CDDR, financial institutions, including Fintechs, are now mandated to obtain and verify the social media handles of customers as part of their KYC requirements (Rule 6(a) of the CDDR).
Legal affairs