There have been debates about the relationship between financial technology (fintech) and the banking industry in Nigeria, particularly whether or not the latter is a threat to the banking industry or not.
Regardless, a non-for-profit organisation is working on putting some standardisation in place for the banking industry in the country; a move that will favour fintechs.
The organisation, the Open Technology Foundation (OTF), is behind the Open Banking Nigeria initiative which can best be described as an advocacy group.
Open Banking Nigeria was initiated because there was no proclamation by the Central Bank of Nigeria (CBN) to standardise Application Programming Interfaces (APIs) for banks in the country.
For Adedeji Olowe who is an OTF trustee, embarking on the Open Banking project is about making a change in the industry. While working on a platform at SystemSpecs which was supposed to allow bank account holders to check all their bank balances from a single mobile platform, he encountered challenges integrating with Nigerian banks
If an established company could find it difficult to get integrated with these banks, then the chances of startups are obviously very low.
It’s on this premise that Olowe alongside other concerned individuals came together to work towards harmonising APIs of banks in Nigeria, which really can be considered as a national programme.
“The idea is simple; all the banks would simply follow the same practice and standards for their APIs. Which implies that they would write their APIs in the same way, call it the same name and they would all behave the same way.”
Accepting a single standard ensures that stakeholders can leverage each other’s innovation and infrastructure. It’s believed that open banking would solve the risk problem that banks are facing with fintech.
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It was expected that there would be a backlash from the banks about open banking; the reverse is the case as they are all interested.
Talking about the challenge of the project, Olowe affirms that funding is a threat as everything going on at Open Banking Nigeria is what people involved can do in their spare time.
Apparently, OTF can’t afford to have full-time employees on the project. Everyone on the project is working as a volunteer, putting their time and personal resources. Asides the lack of funds, there’s also the part of the government.
Although CBN considers it to be a great project, the apex bank is not ready to regulate it yet. CBN has only promised to come in when the banks or stakeholders are doing something dangerous with the initiative. The idea is to avoid using regulation to drive innovation.
It appears the country really can’t wait on regulatory agencies to drive innovation. The same thing happened with the Unstructured Supplementary Service Data (USSD); it took CBN a couple of years after banks had started using USSD before coming up with a regulatory framework (PDF) for the service.
Even without government banking in Nigeria, Olowe believes that funding would have made a difference for the project.
“If we had money, we could have gotten at least five banks on board, but we don’t,” he explains, pointing out that open banking in the United States has government sanction.
What the advocacy group has done is to create a standard with which the banks would have to base their APIs on. With this, no bank is setting the tone. However, the banks are given the opportunity to suggest better ways to make the standard work for the entire banking industry.
With open banking, banks still have control over their system, it only ensures that integrating with Bank A’s API would take exactly the same process as integrating with Bank B.
There’s already an API definition and the project is expected to be completed by 2020. At the end of it, the mission is to ensure that an individual or a startup with an idea that has to do with connecting to one or more banks can go to market in no time.
The measure of success for the advocacy group would be having not less than 70% of Nigerian banks adopting open banking.