The Central Bank of Nigeria (CBN) is planning to introduce corporate governance guidelines for fintech companies in a bid to reduce the rising cases of fraud in the financial sector, sources familiar with the matter have revealed.
The apex bank has set up a committee to come up with solutions that would help protect the banking public from fraudulent activities perpetrated by some fintech firms, especially those that offer digital wallets, mobile money, and payment solutions.
According to the sources, the CBN is concerned about the lack of governance and regulation among fintech companies, which often operate outside the purview of the existing corporate governance guidelines for banks and finance houses.
The CBN’s move comes amid a surge in cybercrime and online fraud in Nigeria, which has affected millions of customers and businesses. According to the Nigerian Inter-Bank Settlement System (NIBSS), the value of electronic fraud in the banking sector rose by 534 percent to N42.5 billion in 2022, from N6.7 billion in 2021.
The NIBSS also reported that the volume of fraud incidents increased by 159 percent to 66,543 in 2022, from 25,693 in 2021. The most common types of fraud were web-based, ATM, and mobile channels, which accounted for 86 percent of the total fraud cases.
The CBN’s proposed guidelines are expected to address the gaps and loopholes in the fintech industry, such as the lack of proper identity verification, security checks, and compliance standards. The guidelines will also seek to ensure that fintech companies have qualified and experienced directors and senior managers who can oversee the operations and risks of their businesses.
The sources said the CBN intends to make the fintech guidelines as detailed and comprehensive as the corporate governance guidelines for the banks and finance houses, which were issued in July 2022 and took effect from August 2022.
The guidelines for the banks and finance houses cover areas such as board composition, board committees, board evaluation, risk management, internal audit, whistle-blowing, and code of conduct.
The sources added that the CBN is also working on a regulatory framework for digital currencies, which are becoming more popular and widely used in Nigeria. The framework will provide clarity and guidance on the legal status, issuance, and taxation of digital currencies, such as Bitcoin, Ethereum, and Litecoin.
The CBN’s efforts to regulate the fintech industry are in line with the global trend of enhancing oversight and supervision of the fast-growing and innovative sector, which has the potential to transform the financial landscape and improve financial inclusion.
However, some experts have cautioned that the CBN should strike a balance between regulation and innovation, and avoid imposing excessive or restrictive rules that could stifle the growth and development of the fintech industry.
They also advised that the CBN should collaborate and consult with the fintech stakeholders, such as the Fintech Association of Nigeria (FAN), the Nigeria Fintech Week, and the Fintech Nigeria Innovation Forum, to ensure that the guidelines are fair, transparent, and beneficial to all parties.
The CBN has not officially announced or confirmed the plan to issue the corporate governance guidelines for fintech companies, but the sources said the guidelines are likely to be released before the end of the year.
The CBN’s spokesperson, Osita Nwanisobi, did not respond to calls and messages seeking comment as of the time of filing this report.
Source: BusinessDay
