Fintechs must pay close attention to regulators to avoid disruption to operations

Over and over, we emphasize the importance of tech-based companies doing everything they can to align with regulators and policymakers, not just to be agreeable, but to avoid being misunderstood by lawmakers.

As a matter of fact, fintechs and other startups must foster public sector engagement to be ahead of disruptive regulation. Change is always going be a slow concept to accept for many people and so the need to always follow the rules, especially as it pertains to the government, is crucial.

The just-concluded annual general meeting and forum of Finance Correspondents Association of Nigeria (FICAN) held in Abuja had Dr Ibrahim Alley of the Research Department of NDIC announce that there will no longer be the issuance of licenses to fintech operators; this will have direct implications on fintechs whose business models involve money deposits, and loan issuance.

The reasons stated included, lack of consumer understanding, miss-selling of products and services, financial exclusion, data privacy among others,  but most importantly, he emphasized that fintech operators are required to fully disclose information before they can be licensed.

[READ MORE: Nigeria Fintechs take lead in Africa, attract $122 million fund in 2019)

The benefits of companies offering technology solutions to everyday existence is very evident and cannot be ignored. Dr Alley acknowledged this as well, highlighting how the industry has helped small and medium enterprises, with the ease of access to credits, enhance competition and an all-round increase in the resilience of the financial sector, but only when things are done right.

However, as Dr Alley noted, the concealment of information about operations slows down the pace of licensing in the country.

There are processes to everything, and the earlier tech companies start embracing that and adhering to them, the sooner all stakeholders can co-exist and be productive. Alley also said the financial regulators in Nigeria, which are the CBN and NDIC, need to fully understand the space before issuing these licenses.

If understanding the process is what is required to facilitate the process of licensing, fintechs must engage, collaborate and create channels to educate and carry regulators along across the happenings in the sector in Nigeria and global best practices.