TheCable

The Central Bank of Nigeria (CBN) has advised banks and other financial institutions to embrace opportunities in open banking to drive financial inclusion in the country.

According to NAN, Aishah Ahmad, Deputy governor, financial systems stability directorate, CBN, said this at the Chartered Institute of Bankers of Nigeria (CIBN) Advocacy Dialogue Series 6 on Tuesday in Lagos.

The stakeholders’ conversation was themed ‘Driving Innovation through Open Banking: Exploring Challenges and Opportunities’.

Open banking is the sharing of financial information electronically, securely, and only under conditions that customers approve of it.

It enables third-party developers to build applications and services around the financial institution, particularly the banks that hold customer data.

Ahmad, represented by Musa Jimoh, director, payment systems management department, CBN, said open banking held enormous potential for the financial service industry.

Ahmad said the apex bank had developed the regulatory framework on open banking in Nigeria, which was issued in February last year.

She said that it became expedient for the CBN to provide an appropriate framework and guidelines to regulate the practice, having observed the green integration of banks and other financial institutions with innovation in the financial services space and the increased adoption of API-based integration in the industry.

Ahmad also said the CBN, in May 2022, issued the exposure draft of the operational guidelines for open banking in Nigeria to the public for comments.

“It is important for us to note that the framework on open banking recently issued by the CBN is designed for banking and other financial services such as payment and remittance services, collection and disbursement,” she said.

Ahmad said that the framework was aimed at identifying data that might be exchanged and corresponding API services that might be implemented and used by the participants.

She said, “while the framework specifies the role of stakeholders, industry participants are permitted to develop API that must be open, reusable, interoperable, robust and user-centric, and overall be secure.

“The opportunities presented by open banking are diverse and many; it serves to enhance financial inclusion, encourage improvement and promote efficiency in the financial service industry.

“These are some of the compelling cases for the implementation of open banking in Nigeria, which convinced the CBN that it is the right way to go.’’

On his part, Ken Opara, chairman of CIBN, said that open banking APIs in the banking industry were now being adopted in more than 87 percent of countries and regions around the world.

Opara said that according to LearnBonds, there were over 10,000 financial institutions around the world with open banking implementations.

“Despite the wide adoption of open banking, it is still very much in its infancy stage, however, demand is growing,” Opara said.

“According to Allied Market Research, the open banking market is growing at 24.4 percent, reaching $43.15 billion by 2026.

“Also, as stated on globenewswire.com, the global open banking market was valued at approximately 9,045 million dollars in 2019 and is anticipated to grow with a healthy growth rate of more than 24 per cent over the forecast period 2020-2027.

“Given this projection, it has become pertinent to explore in detail what the opportunities, risks and path forward could look like for this innovation.”