Can fintech firms innovate out of BVN validation restriction?

The decision to suspend BVN verification for non-banking firms by the Central Bank of Nigeria (CBN) through the Nigerian Interbank Settlement System (NIBSS) has left a gap in the processes of the affected operators.

It has also created what many have come to see as opportunities for a new verification system that is more suitable for the fintech market in Nigeria.

According to NIBSS, the primary custodian of Nigeria’s Bank Verification Number (BVN) service, all partners should suspend the provision of the BVN validation service to their third-party partners.

BVN validation is a means of verifying a customer and is largely used by financial services providers for Know Your Customer (KYC) purposes. it is particularly useful in validating a customer’s date of birth, mobile number, first name, and last name, which helps businesses clearly know the customer they are dealing with.

Experts told BusinessDay that NIBSS‘ position may not be unconnected with the several abuses that the BVN platform has been exposed to in the past due to lack of proper management. Some companies are alleged to have taken advantage of the situation to collate data of banking consumers without the approval of the regulator.

Read Also: Updated: NIBSS bans Paystack, other fintech firms from using BVN validation

Following the directive, firms like Paystack have informed their customers they would be temporarily switching off BVN service starting from April 8.

The company plans to comply with the directive but it hopes to engage the regulator to find a resolution.

While Paystack and other non-banking institutions are fishing for a resolution, Edmund Olotu, CEO of Tech Advance, sees the development as an opportunity for fintech firm to build their own system similar to BVN.

“This is the time for us FinTechs to build our own system by contributing all our data to a central repository,” said Olotu.

Some other experts, however, say there are solutions that are readily available.

Iyinoluwa Aboyeji, co-founder of Future Africa and Flutterwave, said the tech ecosystem needs to do better than tweet angrily at regulators. The players must take responsibility and engage.

“API Intelligence ensures that our tech community is ahead of the government in engaging stakeholders to define how new innovation should be regulated while monitoring and modelling the impact of poor regulation,” Aboyeji said.

The CBN is within its rights to ban Paystack and others from providing BVN validation services, said Aloy Chife, founder and CEO of Saana Capital.

“Paystack/other payment gateways should consume this service from its providers – Onepipe, Appruve, etc. Tech folks: we have many grudges. This isn’t one of them,” he said.

OnePipe

Founded by Ope Adeoye in 2018, OnePipe aggregates APIs from banks and fintechs into a standardized gateway that is easy to integrate and makes partnerships seamless.

It essentially helps fintech companies integrate across platforms including with banks without wasting time on KYC as OnePipe has an array of verification services it provides.

Appruve

Financial services use Appruve API to verify data they collect from their customers across their lifecycle.

A typical lifecycle of a customer being onboarded by a financial service requires the verification of data submitted at each stage of interaction with the product/service in order to derive full value of service.