The internet is changing the way financial services are delivered to consumers. Hence, the financial services space is experiencing a wave of transformation with the advent of companies that are referred to as FinTech companies.
Before now, traditional banks and other financial institutions were the primary providers of financial services. However, with the technological advancement of this era, FinTech companies are competing with traditional banks to provide these financial services.
The primary focus of these FinTech companies is to drive financial inclusion using technology. Thus, they seek to reach out to the unbanked populace that traditional banks have not yet captured.
The Nigerian FinTech industry
The FinTech industry in Nigeria is a fast-growing one. Frost and Sullivan have estimated that Nigeria’s fintech revenue will be $543.3 million in 2022 which is higher than the $153.1 million that it was in 2017.
Research by McKinsey has shown that ease of access and convenience are the primary reasons consumers are switching to the use of FinTech solutions in their financial transactions.
The services offered by FinTech Companies include payment services, mobile transfer of funds, saving and investment solutions, access to loans, crowdfunding, and even international payments and transactions. All of these services are accessible via mobile applications which provide ease and convenience to consumers.
The industry has grown from being a catalyst of the traditional mode of banking to a major competition and disruptor in the same industry. The future tendency is that it might grow to distort the traditional financial system and dictate its navigation.
Recommended Reading: Top 10 Fintech apps in Lagos, Nigeria in 2022
Laws regulating FinTechs in Nigeria
The industry is growing at such a rapid pace that the laws of the country have not been able to keep up. Thus, there is no adequate legal or institutional framework to govern and regulate the activities and operations of these FinTech companies.
No doubt, the Nigeria Startup Bill that is currently awaiting presidential assent, will be a major player in the legal framework for FinTech companies. Until it comes into force as a piece of legislation, these are some of the legal frameworks that currently governs the FinTech space:
1. Banks and Other Financial Institutions Act (BOFIA) 2020
FinTech companies function as financial institutions. Hence, they come under the provisions of the BOFIA. Going by the provision of this Act, FinTech companies in Nigeria must be registered with the Corporate Affairs Commission (CAC) and obtain a valid license from the Central Bank of Nigeria.
2. Central Bank of Nigeria (CBN) Act 2017
Although the CBN Act didn’t envisage financial services delivered via technology, the Central Bank has formulated policies that touch the financial services provided by the FinTechs. Hence, it has become applicable to them.
Some of these policies are Guidelines on Mobile Money Services in Nigeria (2015), Guidelines for Licensing and Regulation of Payment Service Banks in Nigeria (2008), Revised Guidelines for Finance Companies in Nigeria (2014), CBN Risk-Based Cyber-Security Framework and Guidelines for Deposit Money Banks and Payment Service Providers 2018, CBN Microfinance Policy, Regulatory and Supervisory Framework 2011, etc.
3. Investment and Securities Act 2007
The ISA 2007 establishes the Securities and Exchange Commission which regulates activities in the Nigeria capital market. In essence, regulatory policies made by the SEC also apply to FinTech companies in the stock market as it is tasked with the responsibility of protecting investors.
4. Money Laundering (Prohibition) Act 2011
This act provides for adequate disclosure and reporting by both financial and non-financial companies in its effort to prevent money laundering relating to financial transactions by individuals and corporate entities.
5. Money Lenders Act
The Money Lenders Act regulates all lending activities in the countries. It also provides for a money license, which is a legal requirement for companies that lend money for interest. Hence, FinTech companies that are into the business of money lending are governed by this law.
What you should know
- These laws and guidelines are not exhaustive of the legal framework for FinTechs in Nigeria. However, it gets you started in the right direction.
