CBN Introduces Open Banking

CBN Introduces Open Banking
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The Central Bank of Nigeria (CBN) has  approved the operation of Open Banking in Nigeria.

Open Banking in Nigeria refers to data sharing across the banking and payment systems in the country.

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According to the guideline establishing Open Banking, the idea behind the initiative “is to promote innovations and broaden the range of financial products and services available to bank customers”.

The CBN in its guideline said “open banking recognises the ownership and control of data by customers of financial and non-financial services”.

It also recognises the right of the customer “to grant authorisations to service providers for the purpose of accessing innovative financial products and services”.

Open Banking can be used to access customers’ information in relation to Agency Banking, Financial Inclusion, Know Your Customer (KYC), credit scoring/rating etc.

The CBN said the guidelines are anticipated to drive competition and improve accessibility to financial and payments services.

Specifically, the CBN has warned participants in Open Banking to “adhere strictly to security standards when accessing and storing data, and to observe minimum privacy, operational, customer experience and risk management standards as prescribed by the Bank”.

On those that will operate in the Open Banking ecosystem, the CBN has identified “any organisation that has data of customers which may be exchanged with other entities for the purpose of providing innovative financial services within Nigeria”.

“Entities participating in Open Banking are categorised into two. API Provider (AP): this refers to a participant that uses Application Programming Interface (API) to avail data or service to another participant.

“An API Provider can be a licensed financial institution/service provider, a Fast-Moving Consumer Goods (FMCG) Company or other retailers, Payroll Service Bureau etc;

“API Consumer (AC): This refers to a participant that uses API released by the (API) providers to access data or service. An API Consumer can be a licensed financial institution/service provider, an FMCG or other retailers, Payroll Service Bureau etc and;

“Customer: This refers to the data owner that shall be required to provide consent for release of data for the purpose of accessing financial services.”

The CBN will provide and maintain an Open Banking Registry (OBR) for the industry. The OBR will be maintained to provide regulatory oversight on participants; enhance transparency in the operations of Open Banking; ensure that only registered institutions operate within the Open Banking ecosystem.

The guidelines state that the “OBR will be a public repository for details of registered participants. Each participant shall be identified by its CAC business registration number, which shall be the unique key across the OBR system”.

The OBR will also maintain an API interface, defined within these guidelines, to serve as the primary means by which API providers manage the registration of their API consumers. In other words, OBR will be a repository of APIs in the Open Banking Ecosystem.

All participants in Open Banking will “be guided by all extant laws relating to data protection, consumer rights and fair practices while participants will ensure that customer-permissioned data is accurate, up-to-date and complete in data exchanges.

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