The Central Bank of Nigeria (CBN) has warned Nigerian banks and fintechs to be wary of cybersecurity risks as they move into open banking.
The Director of Payments System Policy at the CBN, Mr. Musa Jimoh, gave this charge while speaking during the Q2 Regulators Forum of the FintechNGR themed, “Beyond Compliance: Unlocking Innovation with Nigeria’s Open Banking Framework”.
According to him, banks and fintechs need to invest heavily in cybersecurity as open banking involves the sharing of customers’ data, which could be compromised by hackers if not well protected.
“There have been so many cases of data breach around the world, and open banking should not be a door, an open door for cyber criminals to come in, which is why the security around our APIs, the security around our payment infrastructure, around our data has to be airtight. We need to make it unbreakable and very, very hard for criminals to crack,” Jimoh told financial services providers.
Protecting customer data
Jimoh noted that what financial service providers will be doing in open banking is basically exposing their customer account information to a trusted third party with the consent of the customer.
- He said they must make sure the customer understands what he or she is granting access to and what it will be used for.
- In that regard, he said data security is also crucial as cybercriminals could take advantage of the system.
- According to him, all the financial service providers will need to do a lot of sensitization to educate their customers against cybercriminals who may want to use open banking to defraud them.
“Please be mindful of security around your customers because we don’t want the cybercriminals to latch onto these and begin to send messages that, ‘in order to enroll you in open banking, you need to send a PIN.’ You need to do a lot of sensitization in this regard.
“Security, privacy, and consumer protection are very vital to a successful open banking implementation,” he said.
“The customer must be well informed to know what he or she has granted. We shouldn’t bring customers to grant something that they never knew was what they were granting.
So, it has to be very simplified, and we have to protect the privacy of the customer and ensure that we don’t unduly expose them to cyber criminals.” Jimoh added.
Standardization of API
On its part, Jimoh said the CBN is working on the standardization of the application programming interface (API) for open banking to ensure that every player interacts with the platform in the same way.
“This will ensure that the way a service provider, a fintech, is making a call for account balance in one bank is the same for another bank, which makes it very easy for integration.
“You don’t have to start adopting each standard of the banks; you get your system configured, and you are able to connect to any bank that you are granted access to,” he said.
What you should know
Nigeria became the first African country to establish an open banking regime after the CBN released its open banking operational guidelines on 7 March 2023, outlining rules on how banks and other financial institutions will access and handle customer data.
- Open Banking enables the sharing of customer-permissioned data between banks and third-party firms.
- This system allows banks to securely share their customer data with third-party companies, such as fintech and other financial service providers, with the consent of their customers.
- This sharing of data is done through APIs, which act as a bridge between the bank’s systems and those of the third-party firms.
- Once a customer gives their consent for their data to be shared, the third-party firm can access their data through the bank’s APIs.
This data includes information about the customer’s transactions, account balances, and other relevant information. The third-party firm can then use this data to develop innovative products and services that are tailored to the customer’s needs.
