Starting from April 2024, Nigerian financial institutions are required to enforce more stringent Know Your Customer (KYC) measures. Customers seeking to open accounts or wallets must now furnish either their Bank Verification Number (BVN) or a national identification number (NIN). This regulatory shift, initiated by Nigeria’s Central Bank, responds to heightened concerns surrounding fraudulent activities that have exposed vulnerabilities in existing KYC processes.
Despite the anticipation of enhanced security, industry experts caution against viewing this measure as a panacea for the pervasive issue of fraud. Babatunde Akin-Moses, CEO of Sycamore, a Nigerian lending platform, acknowledges that while there is no singular solution to fraud, the new mandate can expedite the identification of malicious actors. Similar sentiments are echoed by other professionals within the industry.
Adedeji Olowe, a seasoned figure in the financial sector and founder of Lendsqr, offers a nuanced perspective. He asserts that the accounts involved in fraudulent activities have consistently possessed BVNs and NINs. Instead, he identifies the core problem as a “lack of rules and regulations to stop fraud.” Nonetheless, Olowe welcomes the new regulations, expressing surprise that such measures were not implemented earlier. Many experts, including Olowe, anticipate that neobanks will bear the brunt of these stringent rules.
While traditional deposit money banks typically offer Tier-1 accounts with minimal identification requirements, neobanks like OPay and Palmpay have popularized easily accessible accounts, positioning them as instruments for financial inclusion. This approach has allowed them to onboard customers with minimal friction, sidestepping the need for national identity cards—a document owned by only 30% of Nigerians.
Criticism of these lenient KYC measures has been voiced by industry experts. In October, TechCabal reported that Fidelity Bank, holding ₦3.1 trillion ($3.9 billion) in consumer deposits, took measures to block several neobanks due to concerns that their wallets and accounts facilitated the movement of fraudulently obtained funds. Another major bank reportedly engaged in similar internal discussions during the same period.
The new directive, as outlined by Nigeria’s Central Bank, aligns with broader efforts to bolster financial system stability and fortify KYC procedures across all financial institutions.