Nigerian Fintech Sector: SystemSpecs advocates for balanced regulation

African technology giant, SystemSpecs, has called for a balance between innovation and regulation to ensure a healthy financial technology ecosystem that will benefit all stakeholders. SystemSpecs is one of the oldest technology companies on the continent. It is most popular for development the Nigerian government e-revenue collection called Remita. Other notable products include Paylink and HumanManager.

The call is coming amidst the fintech boom in Nigeria, which has led to an increase in the volume and value of transactions by these new technology companies. Adoption by consumers have also been high reflecting increased trust in the services which are challengers to the trading financial services as provided by brick-and-mortar banks.

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In April 2021, the Nigerian Startup Report published by Techpoint noted that Nigerian fintechs raised a total of USD120.56million across 60 deals in 2020 with 18 of these deals being pre-seed rounds. While 3.5% (or 15 of the deals) were based on local capital sources; 37 (71.2% of the total amount raised), were foreign deals, and nine (25.3% of the total amount raised) were deals with participation by both local and foreign investors.

Citing the potential for fraud and participation in unlicensed activities, the Central Bank of Nigeria (CBN), Security and Exchange Commission (SEC) amongst other regulators have gone hard on the fintech sector. However, this has the inherent potential to stifle the growth of the fintech industry.

Recently, Businessday Newspaper organized a workshop with a theme focusing on the “Future of Paytech”. At the event, Ezinne Obikile, an Executive Director of payment business at SystemSpecs, participated in the pane discussion at the event themed, ‘Stick and Carrot: Walking the Tight Rope between Regulation and Innovation,’.

During the panel discussion, Obikile called for more interactions and collaborations between regulators and players in the industry. According to her, proper regulations should present opportunities for growth and innovation for both the regulators and regulated and should engender a growing and resilient financial system.

According to Obikile, in charge of SystemSpecs’ payment and data infrastructure, the payment technology sector’s growth has been attributed to the growing demands for digital products and the opportunity of a cashless economy.

Some of the regulations posing the most challenge to players in the payment ecosystem according to Obikile include the “The Know Your Customer (KYC) policy” which sometimes restricts the activities of paytech companies. While she noted that these regulations overall intention is to drive financial inclusion and combat money laundering and fraud, “obtaining and verifying KYC information has become challenging especially for those targeting the underbanked.”

She noted that calls for customer data acquisition and verification from data custodians come at sunk costs that are difficult to pass on to consumers if the regulated pricing must work. Also sometimes, data is not readily available and when it is, it does not always come in usable formats.

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Obikile, therefore, called for the big stick of KYC compliance to be complimented by the carrot of data availability if regulation and innovation are to be simultaneously successful in the financial technology industry as data is the oil that lubricates the wheel of innovation in the fintech industry.

The fintech expert also urged the Central Bank of Nigeria (CBN) to enforce compliance with the open banking regulation. This will make the KYC easy and aid the development of data driven, customer-centric products.

She further encouraged regulators to engage and collaborate more with the fintech players.

“It is in engagement by regulators that they will better understand industry dynamics, and the feedbacks from such interactions will be very useful in formulating successful policies,” Obikile concluded.

Abiola Gbemi

Abiola Gbemisola is a seasoned investment professional with over seven years experience across investment research and financial advisory. He holds a Bachelor's degree in Economics from Obafemi Awolowo University and is a CFA Level III candidate. He has been featured on several media platforms, sharing his views and insights on the economy and financial markets.

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