This article was contributed to TechCabal by Adedeji Olowe and Ope Adeoye
Nigeria began its open banking journey in 2017, spearheaded by a coalition of industry stakeholders advocating for greater financial innovation and inclusion. This mirrored the UK’s pioneering efforts under the General Data Protection Regulation) GDPR and the Second Payment Services Directive (PSD2), which sought to establish open banking.
In the UK, open banking was initially used as a regulatory tool by the Competition and Markets Authority (CMA) to create a level playing field among the country’s nine largest banks. While open banking served as a remediation tool in the UK, it had the potential to be transformational in Nigeria.
Recognising this, Adedeji Olowe and a group of industry experts founded Open Banking Nigeria on June 1, 2017, marking the beginning of open banking in Africa. Although this journey has taken seven years instead of the anticipated three, we are now approaching its completion.
Along the way, many have asked, “Who are the stakeholders of Open Banking Nigeria?” and some are unclear on what open banking truly entails.
Open banking is an innovation with the potential to transform any region where it’s adopted. However, it comes with its complexities. If you ask twenty experts to define open banking, you’ll likely get twenty different answers. This diversity of perspectives is expected because open banking addresses different problems for different people.
Open banking in Nigeria marks a new era of innovation, empowering customers to grant fintechs and financial institutions access to their information. When the phrase “digital payment” is mentioned, many Nigerians often think “we have seen enough.” Yet, despite the advancement in digital payments, Nigeria has only just begun and barely scratched the surface.
To the matter at hand, who are the stakeholders driving these changes and making open banking a reality? We’ll dive deep into the different stakeholders, examining their contributions to open banking and understanding their roles and motivations.
Regulators
Regulation is the backbone of any successful open banking initiative. Even the UK—the pioneers of open banking—had to create a framework to guide its existence. Without regulation, open banking cannot function effectively anywhere.
Central Bank of Nigeria (CBN)
The Central Bank of Nigeria (CBN) is the apex regulator of the Nigerian banking ecosystem and has been instrumental in shaping open banking in the country. The CBN formulated the open banking regulations and operational guidelines and continues to drive its implementation by collaborating with various stakeholders to standardise practices. While the CBN oversees the Open Banking Registry (OBR), it has delegated the responsibility for its implementation and operationalisation to the Nigeria Inter-Bank Settlement System (NIBSS).
National Data Protection Commission (NDPC)
The National Data Protection Commission (NDPC) is the primary regulator for data privacy in Nigeria with the Nigeria Data Protection Regulation (NDPR). NDPR is the foundation on which open banking sits. The NDPR underpins the ability of end users to entrust API Consumers (AC) to have access to their data. They govern how data of every Nigerian is handled, shared and protected. And without them, open banking is bound to fall short and entwined with a ton of regulatory mishaps.
Securities and Exchange Commission (SEC)
The Securities and Exchange Commission (SEC) is the regulatory body for the capital market in Nigeria and it provides guidance for open finance which may include the use of open banking as part of innovative transformation of the capital market. In the near future, SEC hopes to use open banking to champion open finance. Supported by influential figures such as Aigboje Aig-Imoukhuede and the late Herbert Wigwe alongside other prominent industry leaders, the SEC is diligently working to craft regulations and policies that will pave the way for a new era of open finance.
Nigeria Interbank Settlement System (NIBSS)
The Nigerian Interbank Settlement System (NIBSS) is the shared services created by the CBN and commercial banks. It integrates all banks and CBN-regulated fintechs. NIBSS is a critical driver of open banking in Nigeria as they are mandated by the CBN to operate the Open Banking Registry (OBR) and the Open Banking Consent Management System (OBCMS) on behalf of the industry.
OBCMS is a FAPI grade technology platform that end users use to provide consent to AC via their banks. The OBCMS is operated by NIBSS on behalf of the CBN and the Nigerian banks and uses the BVN to verify end users.
OBN ecosystem facilitators
The OBN ecosystem brings together the key forces behind Nigeria’s open banking revolution. From regulators and traditional banks to fintech innovators and end users.
Open Banking Nigeria
The Open Technology Foundation, better known as the Open Banking Nigeria (OBN), is the foremost entity for open banking in Nigeria. Founded in 2017, it is a non-profit organisation with membership from leading banks, fintechs, and global consultancy in Nigeria. The team kickstarted the open banking revolution in Nigeria and has worked with the CBN and other stakeholders to formulate operational guidelines.
OBN is also responsible for driving industry advocacy, developing the API standards, documenting these standards, and developing an open source API gateway for the financial industry in Nigeria.Often mistaken for regulators due to their name and sometimes seen as a company because of their polished presentation. OBN actually represents a diverse network. It includes major fintechs across Africa and prominent Nigerian banks. To name just a few: Sterling Bank, Fidelity Bank, FCMB, Sparkle Bank, KPMG, PwC, EY, Paystack, Flutterwave, OnePipe, Lendsqr, TeamApt and a host of others.
Traditional Banks (API Providers)
Traditional banks are pivotal players in the open banking ecosystem, often referred to as open banking API providers. They supply APIs that enable other financial institutions to access and integrate data. As regulated entities, these API Providers (APs) facilitate the flow of data and services to another participant. A provider is mostly a bank or any other entity whose customers share their data or grant access to their accounts to other participants.
Banks are vying to take the lead in shaping the future of open banking across Africa. It’s no secret that banks stand to be among the biggest winners in this transformation as they hold the key to the coveted financial data that everyone needs to access.
As one of the primary funders of the Open Banking Nigeria (OBN) initiative, Sterling Bank stands out as a key player in Nigeria’s Open Banking movement, with the CEO and Director playing an active part in propagating the gospel of open banking. Sparkle Bank also stands out as a major advocate for open banking, with CEO Usoma Dosie leading the charge. Dosie, an ardent supporter of OBN, has a proven track record of transforming the financial sector through technology, notably during his tenure as CEO of the defunct Diamond Bank.
Fintechs (API Consumers)
Fintechs in this context are divided into two categories: the licenced ones and those without a licence.
The first are referred to as API consumers and are uniquely authorised to connect and consume open banking APIs. As regulated entities, API consumers (AC) use API released by the providers to access data or service and use this to serve their customers. A typical AC would be a fintech such as a Payment Solutions Service Provider (PSSP) or Switch that connects to an AP (a bank) to view customer data or transactions with consent.
Open banking in Nigeria boasts a diverse array of fintech partners, with nearly every key player in the sector involved. Some of these key players include: OnePipe, founded by Ope Adeoye, a trustee at OBN; Paystack, with Khadijah Abu also on OBN’s board of trustees; Mono, known for its experimentation with open banking in the form of open APIs; Lendsqr, waiting to utilise open banking to drive credit in Africa; Flutterwave, TeamApt, amongst others.
End users
End users are the customers of an API provider who wish for a third-party—an API Consumer or another customer of an AC—-to access their bank accounts for the purpose of data sharing or delegated and authorised transactions.
There are several tiers of end users. On the grassroot level, every Nigerian with a bank account is an end user. On the national level, companies like Piggyvest, Bamboo and other financial institutions can use data to transform how they do business when open banking goes live. On an international scale, companies like Ceviant can also key into open banking to improve their treasury management.
Other key advocates, industry associations and stakeholders
The open banking movement in Nigeria is also gaining momentum thanks to the dedicated efforts of numerous advocates and industry associations. Some other key stakeholders driving this initiative that we must not fail to mention include:
Committee of eBanking Heads in Nigeria (CeBIH)
CeBIH is a prominent association comprising the heads of e-banking in Nigerian banks. They work collaboratively to promote the adoption and integration of e-banking services including open banking. Their efforts are focused on creating a seamless digital banking experience for customers and fostering innovation within the banking sector.
West African Bankers Association (WABA)
WABA is a regional body representing banks and financial institutions across West Africa. They play an instrumental role in advocating for policies and frameworks that support open banking and financial inclusion. WABA’s involvement ensures that Nigeria’s open banking initiatives are aligned with regional standards and practices, facilitating cross-border integration and collaboration
Fintech associations
Various fintech associations in Nigeria are actively involved in driving open banking. These associations bring together fintechs, startups, and innovators who are at the forefront of developing new technologies and solutions for the financial industry. Their contributions are vital in shaping the open banking ecosystem by introducing cutting-edge technologies and fostering collaboration between traditional banks and fintechs.
Open banking’s promising future
The journey that began in 2017 is nearing a significant milestone, but it’s important to recognise that this is just the beginning. As the ecosystem matures and evolves, the continued cooperation and innovation from all stakeholders will be crucial in ensuring that open banking fulfills its potential in Nigeria and potentially serves as a model for other African nations.
This ambitious initiative, inspired by global precedents and tailored to Nigeria’s unique needs, has involved a diverse range of stakeholders, each contributing to the evolving ecosystem. From the Central Bank’s regulatory framework and NIBSS’s technological infrastructure to the pioneering efforts of Open Banking Nigeria (OBN) and the collaborative spirit of fintechs and traditional banks, every player has had a major role in its continued success, and shaping the future of open banking.
The journey is far from over. With continued dedication and collective effort, the vision of a more accessible and dynamic financial ecosystem is within reach.
—-
Adedeji Olowe is a Trustee of Open Banking Nigeria and an advocate of financial inclusion, consumer credit, and open APIs in Africa.
adedeji@openbanking.ng
Ope Adeoye is the founder of OnePipe and also a Trustee of Open Banking Nigeria
ope@openbanking.ng