CBN Releases Operational Guidelines For Open Banking
The Central Bank of Nigeria (CBN) has announced the issuance of operational guidelines for Open Banking in the country.
The new guidelines will enable the sharing of customer-permissioned data between banks and third-party firms, with the aim of creating customer-focused products and services, improving efficiency, and promoting competition in the financial sector.
A statement released on Monday, and signed by Musa I. Jimoh, Director, Payments System Management Department of the CBN, stated that the adoption of Open Banking will deepen the financial system in Nigeria, and further its mandate of ensuring stability in the sector. The guidelines are expected to enhance access to financial services in the country.
According to the statement, all stakeholders in the financial sector are required to ensure strict compliance with the guidelines and other regulations. The CBN has also assured the public that it will continue to monitor developments in the sector and issue appropriate guidance as necessary.
Open Banking has been gaining momentum in several countries around the world, including the United Kingdom, where it was introduced in 2018. The concept allows banks to share data securely with third-party firms, enabling them to develop innovative products and services for customers.
The central bank issued the regulatory framework for Open Banking in Nigeria last year in its efforts to enhance data sharing across the banking and payments system to promote innovations and broaden the range of financial products and services available to bank customers.
The move by the CBN to introduce Open Banking in Nigeria is expected to promote innovation and improve access to financial services for millions of Nigerians. It will also create new opportunities for fintech firms in the country.
Open Banking enables the sharing of customer-permissioned data between banks and third-party firms. This system allows banks to securely share their customer data with third-party companies, such as fintechs and other financial service providers, with the consent of their customers.
This sharing of data is done through Application Programming Interfaces (APIs), which act as a bridge between the bank’s systems and those of the third-party firms.
Once a customer gives their consent for their data to be shared, the third-party firm can access their data through the bank’s APIs. This data includes information about the customer’s transactions, account balances, and other relevant information. The third-party firm can then use this data to develop innovative products and services that are tailored to the customer’s needs.
information. The third-party firm can then use this data to develop innovative products and services that are tailored to the customer’s needs.
Why is it necessary?
For example, a fintech company could use a customer’s transaction history to offer them personalized financial advice or suggest investment opportunities based on their spending patterns. By sharing data through Open Banking, banks, and third-party firms can work together to create new financial products and services that benefit customers and improve the efficiency of the financial system.
Open Banking reduces the barriers to entry for new fintechs by allowing them to access customer-permissioned data through the APIs of banks, thereby minimizing the need for time-consuming and expensive Know Your Customer (KYC) procedures.
Open Banking has the potential to revolutionize the financial industry by promoting innovation, competition, and collaboration among banks and fintech firms. It is expected to lead to the development of new and innovative financial products and services, as well as increased access to financial services for millions of people who are currently underserved by the traditional banking system.
