Nigerian fintechs resume customer enrollment after crackdown

Leading Nigerian fintechs, such as Kuda Bank, Moniepoint, OPay, and Palmpay, have resumed customer enrollment activities after a suspension period. This pause in new account registrations, which caused concern among users, was due to a directive from the Central Bank of Nigeria (CBN).

The suspension aimed to curb unauthorized forex transactions and address compliance requirements, particularly Know Your Customer (KYC) protocols.

The Economic and Financial Crimes Commission (EFCC) began cracking down on many bank accounts involved in unauthorized forex trades, leading to the temporary halt in customer enrollment for these fintech platforms.

This mirrored increased watch-dogging regarding financial illegality in the cryptocurrency sector. Over 1,000 accounts were blocked for peer-to-peer crypto trading before the CBN directive.

Among the affected firms, Moniepoint formally communicated the hold on new sign-ups through a notification. Similarly, Palmpay indicated that enrollments were temporarily unavailable.

These signaled a transformative point in the evolution of Nigerian fintechs, emphasizing the digitization of financial services and increased regulatory oversight. The CBN's directive is part of a broader strategy to enhance regulation and supervision within the financial sector.

Speaking at the 295th MPC meeting, CBN Governor Olayemi Cardoso emphasized the need for stringent measures against money laundering and other illicit financial flows. Cardoso also reaffirmed the commitment to supporting fintech activities while calling for robust regulations to ensure the sector's stability and integrity.

The resumption represents a cautious move within a tightly regulated environment. It aligns with the current approach of enhancing KYC compliance to mitigate risks associated with improper monetary activities. Processes like facial recognition and physical address verification have been introduced.

The regulatory intervention involves collaboration between the CBN, national security organizations, and the EFCC. These authorities are working together to address structural weaknesses and protect the integrity of Nigeria's financial system.

Notably, the decision did not affect deposits and transfers for existing users, ensuring the continued provision of services to current clients while compliance measures are put in place.

Looking ahead, the expansion of customer on-boarding signals a new era of development for Nigerian fintech firms, characterized by increased regulatory scrutiny and strict compliance. As the industry evolves, stakeholders must formulate policies that balance innovation and regulatory compliance to regain customer trust.

It is important not to generalize about the current state of regulation in Nigerian fintech based solely on recent events. The reopening of customer enrollments is a clear sign of efforts to rebuild public trust and strengthen the financial framework for consumers.