The Central Bank of Nigeria has issued operational guidelines for using and delivering open banking services in the country. In a circular to deposit money banks, mobile money operators, and payment service providers, the CBN outlined the rules of engagement for participating institutions.
Open banking provides access to customers’ financial data to third parties via application programming interfaces (APIs). This means that a bank or financial institution can access a customer’s data through an API provided by another financial institution. This data can only be gotten after a customer has consented to it.
According to the guidelines, any organisation possessing customer data that could be used to provide financial services to individuals is eligible to participate in the open banking ecosystem. Apart from the customer, other entities in the open banking ecosystem include API providers and API consumers, respectively referring to organisations that create APIs and those that use APIs created by other organisations.
To provide regulatory oversight and enhance transparency, the CBN shall provide an Open Banking Registry containing details of all approved parties. Participating institutions would also be identified by their CAC business registration number. Furthermore, the OBR will be a public repository of these details.
Traditional financial institutions have access to tons of customer data that can be used to provide services. However, regulatory requirements have hindered them from sharing this data with third parties. However, open banking is set to change the rules as financial institutions, and any organisation with access to customer data can now share it with third parties.
Proponents of open banking point out that it provides users and businesses with unique insights. Users can access better financial services, while businesses can offer personalised services to their customers. Open banking can also help combat fraud, an ever-increasing danger as more companies adopt digital practices.
For Nigeria, open banking is still in its early days, and it is commendable that the CBN has issued guidelines after its initial hesitance.