Fintech
Regulators list conditions to lift ban on fintech customer onboarding
A month after the ban on acquiring new customers, fintechS they are still at the negotiating table with regulators.
Five Nigerian neobanks – Moniepoint, OPay, Palmpay, Kuda and Paga – are still unable to acquire new customers one month after a TechCabal Report revealed that the restriction was linked to a directive from the National Security Advisor (NSA). Leaders of these neobanks met with the NSA, the Economic and Financial Crimes Commission (EFCC) and the Central Bank of Nigeria (CBN) in Abuja on Friday, April 26, two people familiar with the talks said.
In those talks and ongoing engagements, fintech companies were given conditions before they could resume new account openings.
If these talks were to stop, it would slow the growth of venture-backed neobanks that have benefited from the explosion of digital payments. It also highlights the weak lobbying power of fintech which continues to face scrutiny over Know Your Customer (KYC) procedures and fraud prevention.
Neobanks have been asked to limit peer-to-peer crypto transactions, according to a person familiar with the talks. It aligns with a plan by authorities to ban P2P cryptocurrency trading, reported first by TechCabal after the NSA classified cryptocurrency trading as a “national security issue.”
A neobank executive said banning P2P transactions is “impossible” because there is no way to know if a transaction is related to cryptocurrencies. After Nigeria’s initial cryptocurrency ban, traders quickly learned to avoid adding descriptions or comments in transactions.
Despite the complex nature of the request, neobanks have sent notifications to customers warning that P2P transactions will be blocked and reported to authorities.
Neobanks have also been asked to update customer details and enforce bank verification numbers or national identity numbers for all tiered accounts in line with a December 2023 directive. This directive mandates valid identification for all types of accounts, strengthen KYC processes initially loosened to promote financial inclusion.
Last week, Palmpay asked customers to complete facial recognition verification before May 31 to avoid account restrictions, while Kuda asked customers to upload proof of their home address before the same deadline. Other affected neobanks will also ask customers to update their details in the coming weeks, a neobank executive told TechCabal.
A screenshot of Kuda’s notification
These conditions will force fintechs to improve their KYC processes and ensure regulatory compliance The CBN’s new KYC rules, a person familiar with the talks said. Conditions will also change what regulators perceive as a cryptocurrency-friendly attitude among fintechs.
The government’s tough stance against cryptocurrency trading subsequently began in February 2024 two Binance executives arrested. In April the Economic and Financial Crimes Commission blocked 1,146 bank accounts involved in “unauthorized Forex transactions”.
The Securities and Exchange Commission (SEC) also held a meeting in May asking cryptocurrency exchanges to remove p2p functionality. Kucoin, a popular cryptocurrency exchange, suspended p2p trading last week.
Fintechs and cryptocurrency players have no influence in these talks, a former CBN insider has shared. Attempts to band together and put pressure on the government have come to nothing, with one fintech executive saying the initial plan to present a united front to regulators had been ignored by industry players.
In 2023, a plan to convene fintech operators to fight fraud came to naught, highlighting how intense rivalry can complicate cooperation. Traditional banks, on the other hand, routinely cooperate and exert some influence with regulators.
As talks between fintechs and regulators continue, investors in affected fintechs are “restless,” said Tosin Eniolorunda of Moniepoint. The lifting of the ban cannot come soon enough.
*Additional reporting by Muktar Oladunmade