An interview with Mima Benson Aruna — Program Manager, Open Banking Nigeria
1. What are the objectives of your organization and who are the main stakeholders?
The key objectives are to use advocacy to advance open APIs within the Nigerian financial ecosystem in order to help fintechs and banks solve the challenges of financial inclusion and reduce barriers to financial innovations.
2. What does open banking mean to you? How does that differ to open finance?
Open banking is the application of open APIs, as a standard and as a regulation, targeting the banking financial subsector. Open finance, on the other hand, takes the concept of open APIs to the broader financial sectors.
3. Do regulators, fintechs, and banks have different motivations and concerns about the proliferation of open banking?
Yes, they do. Banks are concerned about how this will affect their market hold and customer base. Fintechs are motivated by how many innovative products and services they can offer when they have access to more data. Regulators are concerned about market and system risks.
4. How would you compare the approach of CBN vs other regulators’ approaches across the world?
The CBN approach has been more collaborative than prescriptive. They have relied significantly more on the industry and on Open Banking Nigeria. In other countries, open banking has been top-down either as regulations or laws.
5. Even with a supportive regulator in a market is this enough to guarantee compliance with banks? In your experience how can banks frustrate the adoption of open banking?
In the early stages of open banking, getting banks to sign on was an impossible task. But with the CBN now working with the industry and creating the rules, compliance by banks would be total and sacrosanct. Once the CBN publishes API standards, all banks will have to comply but there will be room to create their own.
6. What are the core technical challenges that banks face when adopting common API standards? How much of a challenge is it for banks to update legacy systems to outward-facing fourth-generation models?
Banks would need to adopt global best practices for API delivery and management. The lack of expertise, especially for evolving competencies, is a challenge that banks face today. Banks would face a lot of challenges providing open banking on top of their legacy technology stacks.
7. In your experience, are bank executives in Africa positioned to completely revamp their tech stack, and are there any native African focussed fintechs such as Mambu that have in your opinion built a composable banking solution that could provide a cost-effective plug and play system?
Yes, they are. Banks like Sterling, CitiBank, and Polaris are fully practicing API banking already. In Nigeria, we have Appzone and OnePipe providing banking-as-a-service stacks.
8. How do you see the evolution of open banking enabling the emergence of new business models? With the wave of funding for digital/neo banks do you feel that the liberation of customer data better enables them to challenge incumbents?
Open banking would enable a better availability of retail credit, allow fintechs to provide smarter Personal Finance Management offerings that drive savings, and allow companies to implement smart treasury and cash management solutions.
9. What advantages do new entrants have due to their lack of technical debt?
The advantages would be significant as technical debts, especially on platforms that process lots of transactions, would be difficult to surmount. The will to retool or rewrite new stacks would be a big ask. Banks have the capacity to revamp their tech stacks but the big five in Nigeria are in danger of being overtaken because some of them may not feel the need to make any changes to their tech stack.
10. Do you see many incumbents launching digital-only outlets or adopting a hybrid structure?
I see banks moving towards having a digital version of themselves where the propositions are more tech-centered, and where that branch of the company has a different CTO and CEO i.e GT Bank, Zenith Bank, etc.
11. Over 36% of Nigerian adults are financially excluded, what impact do you think adoption of open banking will have on the level of financial inclusion in Nigeria?
Banks are sitting on a lot of data and don’t necessarily provide the products that benefit the unbanked or the underbanked, and that’s where fintechs come in. With open banking, it’s easy for fintechs to go to places where banks have overlooked, and by so doing financial inclusion is advanced.
12. What unique challenges and opportunities can be found in SSA in relation to the proliferation of open banking?
Open banking would be challenging in SSA because of two critical factors — it’s easy for bad actors to get customers to lose money as they start tying accounts to shady apps and services. But even before that, the SSA is demographically poor which means not many would have the benefits of smartphones to be able to enjoy the full extents of open banking.
13. What are some of the roadblocks you envisage with respect to open banking implementation in Nigeria?
First, is its security. Data privacy is an issue as banks open their APIs but I believe it will be taken care of by creating a security framework.
Compliance might also be a problem as banks might see this as a threat to the relationships they have cultivated with clients. Therefore, it would take quite a while before most banks can complete their implementation. However, there are ways for the regulator to ensure full compliance.
14. What are the necessary steps to fast-track stakeholder buy-in in the movement for the adoption of open banking in Nigeria?
Development of a reference implementation that brings the standard to life. It would allow fintechs and banks to have a common reference to validate their implementations.