Mon. May 27th, 2024

CBN Open Banking Guidelines To Allow Banks Share Customers Data With Retailers.

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Recently, the Central Bank of Nigeria (CBN) published proposed guidelines that would introduce an ‘open banking’ era in Nigeria, a map that defines rules on how companies exchange digital financial data belonging to consumers.

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Open banking, is the he use of open APIs that enable third-party developers to build applications and services around the financial institution. Greater financial transparency options for account holders ranging from open data to private data. Data is exchanged through application programming interfaces (APIs)—software programs that act as digital plugs for requesting and transferring data.

More services would invite more people into the financial system, growing the economy and quality of life. For example, retailers like Jumia that meet regulatory requirements can connect to a bank’s customer data (at an agreed fee) to get information that could inform buy-now-pay-later decisions or new services. Same applies for banks seeking retailer customers’ data.

The regulator’s push has been driven by fintech startups (and at least one major bank) eager to expand the financial services pie and solve obstacles that have stood in the way of collaboration.

UK banks started adopting open banking in 2018, giving up exclusive control over their customers’ data, and opening up the banking business to tech companies like Meta and Google. Similarly, Nigeria’s open banking ambition is to “drive competition and improve accessibility to banking and payments services,” per the draft document (pdf), Quartz Africa reports.

CBN’s proposal comes a year after the regulator first teased its intention to formalize open banking, by specifying four levels of data (pdf) that can be exchanged. The most risky and sensitive data concern customers’ income ratings and credit score.

According to Quartz Africa report, CBN’s draft emphasizes the primacy of consumer consent at crucial stages of data exchange, including when sharing with non-Nigerian companies. Companies requesting access must comply with the Nigeria Data Protection Regulation (modeled after Europe’s GDPR), among other data ethics requirements.

Industry stakeholders bothered by the requirements being onerous or insufficient will have time to give the CBN feedback before a final standard will be published. There is no timeline for that and it may take a while.

But the draft is “the second to the last step,” Olowe says, “the last being releasing the schedule of implementation. After that comes enforcement.”

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