In 2024, Nigerian fintechs confronted vital regulatory strain, together with fines and a six-week ban on onboarding new customers on account of compliance points with anti-money laundering (AML) and fraud prevention requirements. In response, main fintechs revamped their operations, strengthening compliance measures and growing information assortment efforts to regain regulatory belief.
Their efforts coincided with the CBN retiring 18 administrators in Could 2024, together with a director of different monetary establishments, inflicting a shift in regulatory stance.
“As soon as the brand new guys got here in, they didn’t have such robust emotions (for Nigeria’s fintech business),” stated a fintech government who requested to not be named so they may communicate freely.
The brand new administrators have been extra open to collaborating with the fintech sector than predecessors, permitting main fintechs to enhance their lobbying efforts, two fintech executives stated.
The fintechs have made progress with a number of the compliance points the CBN flagged in 2024. They’ve considerably enhanced their information assortment practices and ship detailed reporting to the Nigerian Monetary Intelligence Unit (NFIU) on politically uncovered individuals, suspicious transactions, fraud circumstances, and geo-tagged transaction information.
They’ve additionally broadened the definition of suspicious transactions. PalmPay, which has over 30 million prospects, has launched software program to flag giant and frequent transactions that seem suspicious. This permits its compliance workforce to assessment the transactions earlier than submitting a report with NFIU.
Moniepoint, a significant Nigerian fintech, has additionally expanded its definition of suspicious actions because it now blocks accounts that log in from sure nations which might be generally linked to fraudulent exercise.
“We don’t need to be a conduit for fraud,” one fintech government acknowledged, echoing a shared sentiment within the business.
Past tightening transaction monitoring, fintechs have restructured their groups to enhance effectivity and accountability. Compliance groups are actually built-in with buyer onboarding and retention groups, permitting for higher identification of potential threats.
Along with inner modifications, fintechs have employed moral hackers—cybersecurity professionals paid to check their programs for vulnerabilities. These moral hackers goal to determine safety weaknesses earlier than malicious actors can exploit them, giving fintechs an added layer of safety.
“These hackers assist us keep one step forward of criminals by exposing potential flaws in our programs,” a fintech government defined.
Minor enhancements to the startups’ apps have additionally been a central focus. PalmPay and OPay have launched facial recognition for first-time customers, giant transactions, and transfers to new beneficiaries. These instruments are designed to reinforce safety and forestall fraudulent actions from slipping by way of the cracks.
Each corporations additionally launched a “evening guard” function for an additional layer of safety for transactions performed after 6 p.m., a interval historically extra susceptible to fraud.
Nonetheless, a number of the fintechs’ enhancements have impacted consumer expertise with a number of prospects sharing complaints of getting accounts blocked after performing giant transactions, requiring a proof of the transactions earlier than regaining entry. However executives argue that this has been crucial to forestall fraud.
Finally, the fintechs efforts have been met positively with regulators softening their hardline stance. Business insiders have famous that regulatory companies, together with the CBN and NFIU, have develop into extra receptive to fintechs’ safety measures and reporting practices.
It will solely proceed so long as Nigerian fintechs enhance their compliance efforts, and like banks, current a unified entrance to regulators, for simpler and extra clear regulatory supervision.
