Remember the days when accessing financial services meant battling long queues at brick-and-mortar banks? Nigeria’s fintech revolution promised to change that, offering a wave of convenience, and inclusion. However, the Central Bank of Nigeria’s (CBN) recent directives throw a curveball. With new customer sign-ups frozen at some fintech companies, is the dream of a frictionless financial future fading?
The Central Bank of Nigeria (CBN) issued a directive in April 2024 to several fintech companies, including Kuda Bank, OPay, Palmpay, and Moniepoint, halting them from onboarding new customers until further notice.
News sources report the CBN directive to be linked to allegations of illicit foreign exchange transactions perpetrated through these fintech companies, for which The Economic and Financial Crimes Commission (EFCC) have frozen accounts suspected of such activity.
Such reports also link the CBN directive to an audit of the Know-Your-Customer (KYC) processes of the affected Fintech companies. In December 2023, the CBN mandated stricter Know Your Customer (KYC) rules, requiring ID cards for account creation. This appeared to contradict a 2013 rule promoting financial inclusion that allowed Nigerians to open accounts without them.
Also, the fintechs have been proactive in implementing the KYC measures.
The impact of this directive is multifaceted. Aisha, a young entrepreneur in Lagos, dreamt of using a fintech app to oversee her business finances. But her plans were abruptly halted by the CBN’s new directive. Prospective customers just like Aisha are unable to open new accounts and access these innovative financial services.
The affected Fintech companies face potential losses in business opportunities and stifled growth. With no new customers to onboard, these fintech companies might experience a decline in revenue. This could force them to lay off employees, reduce services, or increase fees to compensate for the revenue downfall.
Payment fraud is an industry-wide challenge, and fintechs are under increased scrutiny despite banks having a majority of implicated accounts.
The extent of evidence against the accused fintech companies still remains unclear.
However, there are potential positive effects of the directives if implemented strategically. With the aim to stop money laundering and illegal forex transactions through fintech platforms, the CBN’s directives can help enhance financial security in Nigeria.
