Introduced by the Central Bank of Nigeria, Open Banking is a financial services concept that allows third-party financial service providers to access customer financial information and transaction data through secure APIs (Application Programming Interfaces) that banks and other financial institutions provide. Open Banking in Nigeria allows third-party providers to create new financial products and services tailored to individual customers’ needs.
First launched by the CBN in 2018, the Open Banking initiative is part of its broader efforts to promote financial inclusion and innovation in the country.
The already-thriving FinTech space in Nigeria can now heave a sigh of relief because the new guidelines seem to promote its growth, rather than curtail it. This article will be focused on the solutions Open Banking provides to Nigerians.
What are the Open Banking Guidelines in Nigeria?
The guidelines are spelled out in detail in the CBN official release. Download/view here.
Who are the parties involved in Open Banking in Nigeria?
Here’s a table of all the parties involved in the Open Banking ecosystem. Each of them, in their individual ways, has its role to play in delivering fast and efficient services to the end customers.
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Why is Open Banking Important?
Open Banking in Nigeria provides several solutions that can benefit both consumers and businesses. Some of these solutions include:
Improved Access to Financial Services
Open Banking provides third-party financial service providers with access to customer data, which enables them to develop and offer innovative financial products and services. This can help improve access to financial services for consumers and businesses that may have previously been excluded from the formal financial system.
Enhanced User Experience
Open Banking allows customers to easily and securely share their financial data with third-party providers, which can improve the user experience and make it easier to manage finances.
By enabling new entrants into the financial services market, Open Banking can promote competition and drive down costs, which can ultimately benefit consumers and businesses.
Better Risk Management
Open Banking allows banks and other financial service providers to better assess the creditworthiness and risk profile of potential customers, which can lead to more accurate credit decisions and improved risk management.
Open Banking can facilitate faster and more efficient payments by enabling third-party providers to initiate transactions on behalf of customers. This can help reduce transaction times and increase the speed of settlements.
Overall, Open Banking in Nigeria has the potential to drive financial innovation, improve access to financial services, and enhance the customer experience.