Here are laws governing FinTech companies in Nigeria

The Internet is changing the way financial services are delivered to consumers. Therefore, the financial services area is experiencing a wave of transformation with the emergence of companies referred to as FinTech companies.

Until now, traditional banks and other financial institutions were the primary providers of financial services. However, with the technological advancement in this era, FinTech companies are competing with traditional banks to provide these financial services.

The main focus of these FinTech companies is to drive financial inclusion using technology. Thus, they seek to reach out to the unbanked population that traditional banks have not yet captured.

The Nigerian FinTech Industry

The FinTech industry in Nigeria is a rapidly growing one. Frost and Sullivan has estimated that Nigeria’s fintech revenue will be $543.3 million in 2022, up from $153.1 million in 2017.

A survey by McKinsey has shown that ease of access and convenience are the main reasons why consumers switch to using FinTech solutions in their financial transactions.

The services offered by FinTech Companies include payment services, mobile transfer of funds, savings and investment solutions, access to loans, crowdfunding and even international payments and transactions. All these services are available through mobile applications that provide consumers with ease and convenience.

The industry has grown from being a catalyst for the traditional form of banking to a major competitor and disruptor in the same industry. The future tendency is that it may grow to distort the traditional financial system and dictate its navigation.

Laws Governing FinTechs in Nigeria

The industry is growing at such a fast pace that the laws in the country have not been able to keep up. Thus, there is no adequate legal or institutional framework to govern and regulate the activities and operations of these FinTech companies.

There is no doubt that the Nigeria Startup Bill currently awaiting presidential assent will be a major player in the legal framework for FinTech companies. Until it comes into force as a piece of legislation, here are some of the legal frameworks currently governing the FinTech space:

Banks and Other Financial Institutions Act (BOFIA) 2020

FinTech companies act as financial institutions. Therefore, they come under the provisions of BOFIA. According to the provision of this law, FinTech companies in Nigeria must be registered with the Corporate Affairs Commission (CAC) and obtain a valid license from the Central Bank of Nigeria.

Central Bank of Nigeria (CBN) Act 2017

Although the CBN Act did not envisage financial services provided via technology, the central bank has formulated guidelines affecting the financial services provided by FinTechs. Therefore, it has become applicable to them.

Some of these guidelines are Guidelines for Mobile Money Services in Nigeria (2015), Guidelines for Licensing and Regulation of Payment Services Banks in Nigeria (2008), Revised Guidelines for Finance Companies in Nigeria (2014), CBN Risk-Based Cyber-Security Framework and Guidelines for Depository Banks and Payment Service Providers 2018, CBN Microfinance Policy, Regulatory and Supervisory Framework 2011, etc.

Investment and Securities Act 2007

The ISA 2007 establishes the Securities and Exchange Commission which regulates activities in Nigeria’s capital market. Essentially, regulatory guidelines made by the SEC also apply to FinTech companies in the stock market, as it is tasked with protecting investors.

Money Laundering (Prohibition) Act 2011

This Act provides for adequate disclosure and reporting by both financial and non-financial companies in their efforts to prevent money laundering related to financial transactions of individuals and corporate entities.

Law on lenders of money

The Moneylenders Act regulates all lending activities in the countries. It also provides a money licence, which is a legal requirement for companies that lend money against interest. Therefore, FinTech companies that engage in money lending are subject to this law.

What you should know

• These laws and guidelines are not exhaustive of the legal framework for FinTechs in Nigeria. However, it does get you started in the right direction.

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