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Fidelity Bank Blocks Transfers to OPay, Kuda, Moniepoint, Palmpay and others over KYC

In a remarkable move aimed at safeguarding its customers, Fidelity Bank has taken a significant step by blocking transfers to OPay, Moniepoint, and Palmpay due to Know Your Customer (KYC) concerns. This strategic decision, driven by a commitment to protect their clientele, has important implications for Fidelity Bank account holders.

Understanding the Block

If you’re a Fidelity Bank account holder, you’ll no longer be able to initiate a bank transfer to users of Opay, MoniePoint, Kuda, PalmPay or other NEO banks directly from your bank’s mobile app. To illustrate the impact, imagine you need to pay a vendor 50,000 Naira for services rendered, and that vendor utilizes a MoniePoint account. Fidelity Bank’s message is clear: you can’t use their mobile app for such transactions.

The rationale behind this bold move is rooted in the alarming rise of fraudulent activities and the exploitation of these NEO banks by criminals, including “Yahoo boys.” It’s far easier for fraudsters to open fresh accounts with NEO banks like MoniePoint, Opay, or Kuda due to their more relaxed KYC requirements.

People close to the situation told TechCabal that the transfer restrictions began at least two weeks ago over rising fraud and customer verification concerns.

Divergent KYC Regulations

Contrast this with the stringent KYC regulations enforced by traditional banks. When opening an account with a conventional bank like Zenith Bank, you are required to provide various documents, including a electricity bill, a valid ID card, and a passport photograph. In contrast, NEO banks like Kuda, Monie Point, or Opay have chosen to forgo many of these stringent requirements in their quest for rapid growth.

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Opening an account with an Opay POS agent, for example, takes less than 5 minutes, and no documents like a NEPA bill are needed. This flexibility has made these NEO banks attractive to individuals with malicious intent, leading to a surge in fraudulent activities.

Neobanks are completely legal and regulated by the CBN, they however offer bank accounts that do not require the strict KYC requirements of traditional banks. PalmPay for instance offers multiple levels of KYC that allows customers unlock higher levels as they upgrade their accounts. This means a customer can open an account and transact without needing to provide KYC until they require services offered at a higher level.

Real-Life Consequences

The consequences of this lax approach to KYC are starkly illustrated in real-life experiences. A notable case involved Maduka Fidorocks Onwukeme, who is not only a victim of a compromised bank account but also a lawyer. When he delved into the situation, he discovered that the Opay account that received his stolen money was created just 30 minutes before the hackers moved the funds there. Opay had not requested KYC information, leaving the account’s providers unknown.

What followed was a lightning-fast withdrawal of the money within 20 minutes through a POS agent. Despite the quick action, Maduka Fidorocks Onwukeme reported the incident to the Central Bank of Nigeria (CBN), alleging that his money had been stolen by non-state actors, with Opay complicit due to its carelessness. Surprisingly, within two weeks of filing his complaint with the CBN, the stolen funds were replaced by Opay.

Such stories are not isolated incidents. Since transactions through NEO banks leave minimal traces, scammers find them convenient for receiving stolen funds, which they can swiftly withdraw through POS agents. This has become a daily occurrence and a significant concern.

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Fidelity Bank’s decision to block transfers to NEO banks represents a commendable effort to protect its customers and combat fraudulent activities. It highlights the broader issue of KYC regulations and the vulnerabilities associated with these emerging banking platforms. As technology and the financial landscape continue to evolve, the need for proactive measures to safeguard customers becomes increasingly evident.

Ibrahim Ismail

A passionate and highly skilled individual who has seamlessly blended the worlds of statistics, technology, and finance.

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