CBN says unregulated financial service platforms challenging system oversight

The Central Bank of Nigeria (CBN) said on Wednesday that the continued operation of financial services platforms which are not yet under its regulation is posing huge challenge in effectively monitoring their activities.

Dipo Fatokun, Director, CBN Banking & Payments System Department said in Abuja that technological developments have led to disruptive innovations by Financial Technology (FinTech) companies in the financial system which  facilitated the expansion of electronic payments and helped in providing financial services to previously unreached groups.

According to him, these developments have led to the participation of non-financial organizations in the payments system.

He was speaking at a workshop on the overview of emerging regulations to protect online, mobile and payment services, organized by Maxut consulting and Vasco data security.

He said  CBN has tried to incorporate a number of these service providers into the regulatory space but raised concerns that a number of the FinTech companies still operate under the radar, providing user-friendly mediums and platforms for accessing financial services, while preferring to remain in the unregulated space, as a result of the perceived difficulties of licensing and regulation.

“With increased innovations, platforms are being created that enable the initiation and completion of financial transactions without the use of any regulated financial service provider.

“As acceptance for these channels increases, so will its spread. This poses a challenge for the oversight of the payments system in Nigeria,” he told the participants.

He said a key task of the CBN is to promote the smooth operations of an efficient payments system, which is core to the financial stability of any country and has important implications for monetary policy implementation and for the efficiency of the economy

He said to achieve the broad objectives of the Payments System in the country, the CBN develops and regulates the implementation of regulation to facilitate the growth of initiatives that will harmonize payment operations in the country.

He said in its regulatory role, the CBN is careful to approach the dynamic of payments system policy creation as a delicate balance, in order not to stifle innovation and growth in the payments system.

He said the sustenance of the CBN’s financial inclusion strategy, the PSV 2020 Vision and cash-less policy would ensure that financial services are provided at affordable costs to sections of disadvantaged and low-income segments of the society.

Michael Odusami, President MAXUT said the workshop was to create awareness on developments in the payment system both locally and globally and for the regulator to be particularly prepared for future developments in the payment system.

“There is going to be a lot of change in the future that they need to be prepared for, not just from their processes or what they do within the institution but also in terms of how they will secure what they are going to be doing because security is going to play a major part in that future,” Odusami stated.

“There is going to be a major change on how things work, technology is going to play a big part and that is why the way we used to regulate before may not work,  we have to be a lot more proactive, much more ahead of the game before that future can happen.

Speaking on the security threats in the country, he said, “a lot of the things we face is around social engineering, people impersonating other people and a lot of fraud contained within the country, is done by people inside the system itself, people that know how the system works and compromising it.

He said the Nigerian payment system is lucky not to have had too many foreign attacks so far.

“Our money is not very convertible yet, if you steal naira, you cannot really do much with it unless you spend it within Nigeria, so that has helped.

“So, it is a lot of internal fraud, a lot of social engineering fraud, those are the major ones we happen to deal with.

On whether the regulators are doing enough, he said, “there is a lot more that be done.”

 

Onyinye Nwachukwu