In furtherance of its sustained regulatory drive towards financial system stability in the country, the Central Bank of Nigeria (CBN) has issued the Regulatory Framework for Open Banking in Nigeria in its efforts to enhance competition and innovation in the banking system.
Specifically, the Regulatory Framework 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 CBN, open banking recognizes 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, and it is anticipated to drive competition and improve accessibility to banking and payments services.
Under the new Open Banking regulatory regime, participants are obliged to adhere strictly to security standards when accessing and storing data, and shall be subject to minimum privacy standards, operational standards, risk management standards and customer experience standards as prescribed by the bank.
The CBN stated on the scope of the guidelines that the guidelines apply to banking and other related financial services as categorized and determined by the bank in the Regulatory Framework for Open Banking in the country.
The Regulatory Framework provided in the guidelines on participants that “given the open banking proposition, any organisation that has data of customers which may be exchanged with other entities for the purpose of providing innovative financial services within Nigeria, is eligible to participate in the Open Banking ecosystem.
“Entities participating within the Open banking ecosystem are categorized based on the following roles that they may perform. Participants may assume more than one role depending on their services and offerings”, it added.
The framework categorized the participants three, namely API Provider (AP) which refers to a participant that uses API to avail data or service to another participant and who 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) which refers to a participant that uses API released by the (API) providers to access data or service and that can be a licensed financial institution/service provider, an FMCG or other retailers, Payroll Service Bureau etc; and Customer, who is the data owner and end-user that may be required to provide consent for release of data for the purpose of accessing financial services.
The CBN listed the objectives of the open banking regulatory framework as including, providing clear responsibilities and expectations for the various participant categories; ensuring consistency and security across the open banking system; stipulating safeguards for financial system stability under an open banking regime; promoting competition and enhancing access to banking and other financial services, and outlining minimum requirements for participants.
To ensure strict compliance with the guidelines, banking system regulator shall provide and maintain an Open Banking Registry (OBR) for the industry.
According to the apex bank, the OBR shall be maintained for the purposes of providing regulatory oversight on participants, enhancing transparency in the operations of Open Banking, and ensuring that only registered institutions operate within the open banking ecosystem.
It further stated that the OBR shall be a public repository for details of registered participants and that each participant shall be identified by its CAC business registration number, which shall be the unique key across the OBR system.
This is even as it also disclosed that the OBR shall maintain an API interface, defined within the Open Banking API guidelines, which shall serve as the primary means by which Tier 3 participants can manage the registration of their API consumers.
It would be recalled that the apex bank, in collaboration with industry stakeholders, developed operational guidelines for Open Banking in line with the provisions of the regulatory framework.