CBN issues open banking guidelines to promote financial innovation

The Central Bank of Nigeria (CBN) has provided a regulatory framework for Open Banking in Nigeria to promote innovation and expand financial services for bank customers.

The apex bank disclosed this in its “Operational Guidelines For Open Banking In Nigeria” released in May 2022.

According to CBN, the guidelines aimed to ensure security across the banking system, promote competition and enhance access to banking and other financial services.

“The Central Bank of Nigeria, hereafter called the Bank, had issued the regulatory framework for open banking in Nigeria to enhance competition and innovation in the banking system,” the operational guideline reads.

“The Bank recognised the existence of an ecosystem for Application Programming Interface in the banking and payments system and is aware of various efforts in the industry to develop acceptable standards among stakeholders.

“Open banking in Nigeria across the banking and payment system will promote innovations and broaden financial products and services, which involves sharing of customer data and inter-connectivity of systems, therefore, exposing the participants to risks such as cybersecurity, money laundering, regulatory and compliance, contract management, product management among others.

“The open banking offers benefits and opportunities to the financial sector but is accompanied with risks that could undermine the objectives if not properly managed.”

The CBN further said participants such as financial institutions, service providers, companies, payroll service bureau, and customers, among others, must adhere to the standards of the open banking system.

“Any organisation that has data of customers, which may be exchanged with other entities for the purpose of providing financial services within Nigeria is eligible to participate,” CBN added.

“Participants shall adhere strictly to security standards when accessing and storing data, and shall be subject to minimum privacy standards, operational standards, risk management standards and customer experience standards as prescribed by the Bank.”