Patrick Njoroge, former governor of the Central Bank of Kenya, has said the age of African fintech operating below global best practices is over.
He said at the BusinessDay’s Policy Intervention Series on Fintech themed, ‘Fintech in Africa: Navigating Cross Border Regulation,’ held in Lagos on Tuesday.
The event featured industry experts in the fintech industry who came together to discuss the way forward in the fintech industry.
Read also: Fintech operators need to be world-class to scale globally — Patrick Njoroge
According to a 2022 McKinsey report, Africa’s financial services market could grow at 10 percent per annum, reaching around $230 billion in revenues by 2025. Nigeria’s fintech sector makes up about one-thirds of this market.
“The age of average is gone. There is a need for African fintech operators to be world-class in standards and all that the industry does,” Njoroge said.
According to the former CBK governor, fintech seeking to operate beyond borders must have standards that fit anywhere. He gave an instance where an African fintech seeking to operate in Kenya struggled to get a license due to a long transactional speed. The Kenyan economist noted that transaction speed in Kenya is pegged at four seconds, and this operator could only meet eight seconds.
He highlighted that the lack of this standard is part of why fintech companies from other countries struggle to get licenses in Kenya. He also noted that fintech companies seeking to operate in new countries must comply with governing laws and requirements.
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In 2022, Nigerian fintech ran into trouble with the Asset Recovery Agency of Kenya (ARA), which suspected these companies as money laundering conduits. A couple of these fintechs may soon get payment licences as the CBK intends to issue new licenses soon.
According to Njoroge, Kenya’s fintech regulatory space and requirements set the tone for Africa. He stated that being world-class requires holding fintech and payment players accountable for their responsibilities and compliance with regulators’ policies.
“We need to hold all players accountable for their offerings because their success and lack thereof impact the lives of millions of Africans. From the firms to the regulators, compliance is important,” he said.
Stanley Jacob, chief executive officer of Zest and vice president of the Fintech Association of Nigeria, participated in a panel session entitled, ‘Exploring and Enhancing Fintech Opportunities in Nigeria and West Africa.’
Jacob said lack of compliance is the reason why many fraud cases happen in the Nigerian fintech space.
He said, “Most of the fraud cases we see are man-induced. The lack of compliance has been why many of them come to light. There is a need for compliance with standards, compliance regulations, and certifications in the fintech industry. To be a player, you must be ready to comply with regulatory and legislative requirements.
“Compliance is normal. You do not have to like the rules to comply. If you want to be in the space, you have to adhere to the rules and regulations guiding the space.”
Njoroge further noted that innovation is needed on the continent, and players need to look beyond their local borders. “Innovation borders are breaking down, but they are not breaking down fast enough. It is beyond a country, so you should not think of Nigeria as your destination; it is global,” he said.
Oswald Guobadia, managing partner of DigitA, noted that innovation must respect regulation to avoid conflict with regulators. “It is important to understand policies that govern a space in which you are trying to innovate. You need to ask yourself, what are the rules? How do I participate in the regulations to ensure that they are forward-thinking?”
Guobadia, the former senior special assistant on digital transformation to former President Muhammadu Buhari, highlighted that the Nigerian Startup Act was meant to enable fintech and startups.
Former President Muhammadu Buhari signed the Nigerian Startup Act into law in 2022 to harness the potential of the digital economy. The act seeks to promote the country’s rapidly growing tech sector. However, Guobadia said more needs to be done by the private and public sectors for the benefits of the act to be actualised.
Tayo Awofiranye, managing partner of The Trusted Advisors Solicitors, emphasised that the fintech industry needs to be regulated differently from brick-and-mortar banks.
“We should regulate fintechs differently from how we would regulate other brick-and-mortar banks. The sensitivity is there, but it also does not mean we should not regulate them at all. Doing this will take care of competition, data protection, anti-money laundry and ensuring that these guys can at least grow in their scope,” he said.
He further said that central banks in Africa should encourage a balance between nurturing fintech and enforcing laws.
Jacob of Zest added, “The purpose of fintech is not to circumvent regulations. It is important to ensure that fintech aligns with the laid-down regulations.”
