Fintech growth calls for new regulatory insights, says NDIC boss
The Managing Director/Chief Executive, the Nigeria Deposit Insurance Corporation (NDIC), Umaru Ibrahim, said the sweeping changes in the financial service industry have imposed fresh regulatory challenges, which call for new insights and approaches.
Ibrahim said the changes, which are driven by technology, are without associated risks that must be tackled seamlessly without stifling growth and innovation of the financial technology (fintech).
The NDIC boss made the submission at the 2020 NDIC Editors Forum held in Lagos.
Represented by Director (Communication and Public Affairs Department, Basir Nuhu, Ibrahim stated: “Managing the risks associated with emerging technology without stifling innovation has become a major theme amongst regulators and policymakers.
In Nigeria for instance, the Central Bank recently released a draft framework for regulatory sandbox operations to encourage innovation, especially for startups. The NDIC equally established an ‘Innovation and Fintech Unit’ to drive its agenda for emerging technology and provide solutions to improve the safety of depositors and the banking system.”
He said the Corporation is currently faced with two fintech-related concerns – how to identify and ensure non-bank deposit-taking institutions and leverage the potentials of fintech to effectively execute its operation easily, speedily and reliably.
“Consequently”, he noted: “We look forward to modernising our data collection and analysis through the use of fintech solutions/tools (Regtech and SupTech) to handle the following business processes better than currently being done:
risk-based supervision (RBS), monitoring compliance, premium administration, early warning signals, stress testing, analysis of insured institutions’ performance.”
Citing global researches on the growth of the domestic fintech ecosystem, he said that Nigeria is now home to over 200 fintech standalone companies in addition to a number of related solutions offered by banks and mobile network operators. He added that Nigeria’s fintech brands raised over $600 million in funding between 2014 and 2019.
Ibrahim said Nigeria must necessarily tap into fintech goldmine in its effort to diversify revenue earning, create the next generation of jobs and close the income gap.
Ibrahim also said the impact of the COVID-19 pandemic and the resultant disruptions had negative consequences on the economy, caused credit risk and triggered fear of financial crisis, putting more pressure on regulators.
In his presentation, Deputy Director of the Corporation (Research Department), Kabir Katata, said there is a need to “ensure that authorities and researchers have the proper data to monitor and study fintech and big tech credit platforms”. He called for sustained efforts to bring fintech and big tech lenders into the fold of official regulatory reporting.
“As regulatory oversight increases, a thorough understanding of financial services in the Nigerian context, particularly in compliance, is becoming a prerequisite for success. Most fintech companies have a technology background but limited experience in financial services and will need to ensure that they develop or acquire this competency,” Katata advised.