Customer verification is likely one of the most necessary necessities each monetary establishment places into place. Before 2014, opening a checking account in Nigeria required clients submitting bodily technique of identification like a duplicate of their National Identity Card, voter’s card, passport, and even utility payments (akin to electrical energy receipts). This meant that clients needed to repeat this course of at each financial institution they wished to open an account with.
However, as know-how improvements started to drive international digital transformation and the monetary panorama skilled a drastic shift, how monetary establishments method buyer identification began to vary.
In a bid to satisfy the digital buyer identification necessities for monetary companies, the Central Bank of Nigeria (CBN) by the Bankers’ Committee, and in collaboration with all banks in Nigeria, on February 14, 2014, launched a centralised biometric identification system for the banking trade tagged the Bank Verification Number (BVN). As meant, the BVN would go on to grow to be the one most necessary technique of identification when onboarding individuals into Nigeria’s monetary ecosystem. With the BVN, clients can now open a checking account or digital pockets with out having to submit a number of paperwork of bodily identification each time.
Get the most effective African tech newsletters in your inbox
Today, open banking, a banking system the place third-party suppliers are granted open entry to client banking, transactions, and different monetary data from banks and non-bank monetary establishments (NBFIs), by using Application Programming Interface (API), is one the latest and hottest improvements within the monetary trade.
The CBN, once more, in 2019, launched the Regulatory Framework for Open Banking in Nigeria to manage the transmission of monetary data between banks and third-party monetary service suppliers within the nation. This transfer signifies that the apex financial institution helps the success of this innovation and ensures customers’ data is correctly dealt with.
So there’s open banking, and there’s digital identity. What’s their relationship with one another and their shared challenges; and what should be carried out to optimise their promise?
For the 4th version of Digital Identity Matters, which was sponsored by VerifyMe and came about on April 22, TechCabal hosted a panel with Ope Adeoye, founder and CEO of OnePipe; Adedeji Olowe, founder and CEO of Lendsqr and Trustee at Open Banking Nigeria; and Esigie Aguele, co-founder and CEO of VerifyMe. The dialogue was moderated by Tosin Olaseinde, founder and CEO of Money Africa.
Challenges going through open banking and digital identity
According to Olowe, the largest drawback going through open banking and digital identity is the shortage of synergy between stakeholders within the area, which has segued right into a failure to standardise processes.
“Providing a general standard for the digital identity providers is as important as the identity itself,” stated Olowe. “African providers don’t use the same standard. This means a company can’t change its identity provider without rewriting almost all their lines of code—so time and context will be lost during this period.”
Until there’s a sync, he stated, there gained’t be standardisation, and with out that, the entire idea of digital identity will proceed to battle with seamless integration into the open banking infrastructure.
Building blocks of a strong digital identity system
It has been established that for any digital monetary establishment to operate correctly, it should have a strong identity verification system. But and not using a sturdy identity system, that may’t occur.
“The first thing to having a robust digital identity system, I’ll say, includes having a lot of people digitise; and we still have a long way to go in this area,” Aguele stated. “Then we can talk about continued regulation, strong infrastructure, open banking, and system interoperability that allows, for instance, data from A to be understood by B.”
Aguele additionally thought that rules that talk correct standardisation are wanted.
How far has Africa gone in open banking and digital identification?
Olowe thought Africa is doing actually poorly on the open banking and digital identification entrance. Adeoye agreed however with a caveat, explaining that the poor efficiency is as a result of “the whole concept is still nascent, and we haven’t picked up the baton really.”
How can stakeholders drive adoption of open banking?
Adeoye stated, amongst all of the stakeholders concerned, the non-public sector is the most effective guess to massively drive adoption for open banking. Olowe supported Adeoye’s submission.
“I think it starts from a proposition. And I think most times propositions are better led by the private sector, just because propositions that will be sustainable need to have some kind of source, monetary gain, or value to the organisation trying,” stated Adeoye. “Number two is then creating frameworks that allow citizens to find their way to the grassroots.”
Olowe stated the velocity with which the non-public sector makes selections makes them the most effective driver of open banking. “Regulators are slow, and when they finally show up, they stuff their ideas down everybody’s throats, and some people will choke and die.”
You can watch the complete dialog right here: