Open banking was first implemented in the United Kingdom through the revised Payment Services Directive (PSD2) and Open Banking Standard in 2018 and since then several jurisdictions around the world have begun to adopt their own approaches to open banking.[1]
In line with its mandate to promote the stability and deepening of the financial system, on 17 February 2021, the Central Bank of NigCBeria (the “CBN”) issued the regulatory framework for open banking in Nigeria (the “Framework”).
What is Open Banking?
Open banking is the arrangement that allows you as a customer (end-user) to authorise your bank or financial service provider to share your financial information with other participants within the financial services system (e.g., other banks, third party financial service providers) so as to develop more customer-centric services and financial products. Open banking is powered by a technology called Application Programming Interface (API). With open API, participating banks and other financial institutions will be able to access information on other participants’ financial products and services as well as personal information, transaction history, credit score, income ratings etc. of other participants’ individual customers.
For example, open banking will allow an investment app to have access to a person’s financial information (including number of accounts, balances, loans, repayments etc.) from all that person’s banks or financial service providers (provided the person has granted consent to same) in one central location.
[1] Deloitte, Open Banking: Disruption is afoot for regulators as well as banks (Deloitte Perspectives) available at <Open Banking: Disruption is afoot for regulators as well as banks | Deloitte UK> 16 April 2021.
