By Cynthia Ezekwe

The Central Bank of Nigeria (CBN) in  collaboration with industry stakeholders  has developed operational guidelines for open banking in line with the provisions of the regulatory framework  to enhance transparency, access to financial services, and  deepen the financial systems in Nigeria.

The apex bank disclosed this in a circular referenced  PSM/DIR/PUB/CIR/001/043, signed by Musa I.Jimoh, director, payment systems management department, and issued to deposit money banks, mobile money operators, and payment service providers.

Open banking is the practice of enabling secure interoperability in the banking industry by allowing third-party payment services and other financial service providers to access banking transactions and other data from banks and financial institutions.

Based on this, the apex bank recognises the existence of an ecosystem for Application Programming Interface (API) in the financial and payments system and set up the regulatory framework for open banking in Nigeria, which established principles for data sharing across the banking and payments system to promote innovations and broaden the range of financial products and services available to bank customers.

According to the circular, open banking recognises the ownership and control of data by customers of financial and non-financial services, and their right to grant authorisations to service providers for the purpose of accessing innovative financial products and services. Open Banking applicability includes Agency Banking, Financial Inclusion, Know your customer (KYC), credit scoring/rating etc.

The apex bank disclosed that the  guidelines apply to banking and other related financial services as categorised and determined by the bank in the regulatory framework for open banking in Nigeria, and implored participants in open banking to adhere strictly to security standards when accessing and storing data, while noting that the standard is  subject to minimum privacy, operational, customer experience and risk management standards as prescribed by the bank.

The circular also stated that the guidelines are anticipated to drive competition and improve accessibility to financial and payments services, and deepen financial systems in Nigeria.

According to the guidelines, the apex bank shall provide and maintain an open banking registry to give regulatory oversight on participants, regulate operators and enhance transparency within the open banking ecosystem.

It also stipulates that the consent of bank customers is required before their data can be acquired for open banking products and services, among others.

 “The adoption of open banking in Nigeria will foster the sharing of customer-permissioned data between banks and third-party firms to enable the building of customer-focused products and services. It is also aimed at enhancing efficiency, competition, and access to financial services,’’ the circular noted.