The Central Bank of Nigeria (CBN) is considering stepping in with corporate governance guidelines specifically targeted at fintech companies as a measure to tackle the growing incidence of fraud in the financial system, according to sources with knowledge of the matter.
The apex bank had recently set up a committee to come up with solutions that would help reduce the threat to the banking public. Fintech companies are often considered the loophole as they intensify efforts to acquire new users who are mostly unaware of the right security measures to take to secure themselves while online. There are also concerns that some fintech companies are not conducting the necessary security checks in their bid to onboard customers faster.
The CBN’s concern was underscored in a recent circular in which it made it mandatory for all financial services operators to henceforth display their names on websites, portals, applications, and other online business platforms. The financial regulator said the move was to engender trust and confidence in the use of such products and services.
“The practice portends risk to consumers of such products or services, misleading consumers and difficulty to seek redress when the need arises,” it said in the statement signed by Haruna Mustafa, director of Financial Policy and Regulation Department.
According to a source privy to the retreat of the committee set up by the CBN, there is no going back on the corporate governance guidelines. The guidelines will seek to bring the principles of fitness for licenced financial companies.
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“For example, to be a director or a senior person in banking, there is a minimum requirement of experience and qualifications,” the source said. The CBN plans to make the fintech guideline as detailed as the corporate governance guideline for the banks and finance houses.
In July 2023, the CBN issued corporate governance guidelines for all commercial banks, merchants, non-interest and payment service banks, and financial holding companies. The circular was scheduled to kick off from 1 August 2023. Experts say this guideline failed to specifically address fintech companies even though it mentioned payment service banks mostly led by telecom operators.
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Hence, fintech companies, including mobile money operators, digital banks, and payment solution service providers, have operated outside the purview of the guideline. But experts say a guideline that speaks directly to fintech companies is long overdue.
“I strongly believe that the lack of governance amongst fintech companies is a major factor behind the frauds and shut downs we’ve been hearing off recently. This is not to say that these things do not happen in traditional banks,” Edoka Idoko, CEO of Ojireh Prime, a fintech company. “They happen but there is a clear structure around governance, reporting and adherence to regulation.”
Idoko said the corporate governance adherence is why it is almost impossible to find a bank that unilaterally shuts down, except if the CBN is responsible for closing the bank down.
“Acquiring Solid Allianze opened my eyes to the need for such a structure if we really want to stay the long ride on this journey,” he said.
