In this Article, we shall identify what a FinTech Company is, the Regulatory bodies that control and regulate the FinTech sector in Nigeria and regulatory requirements for FinTech Companies in Nigeria.
What is a Fintech Company?
FinTech has been defined as an economic industry composed of companies that use technology to make financial services more efficient[i].
Thus, a FinTech Company is one that provides financial services such as banking services, money transfer, online payment services, etc. digitally as opposed to the traditional over-the-counter or in-person financial services. Examples operating in Nigeria include Interswitch, Flutterwave, Remita, Opay, Piggyvest, etc.
Regulatory Bodies for Fintech Companies in Nigeria.
The activities of FinTech Companies are regulated by various agencies in Nigeria. These are mostly government agencies and define the scope, administrative and operational requirements for FinTech companies.
The Corporate Affairs Commission (CAC):
This is usually the first regulatory point of contact for startup FinTech companies. They are responsible for incorporation of Companies[ii] and without due approval by the CAC, no FinTech Company can be validly operational in Nigeria.
The Central Bank of Nigeria (CBN):
The CBN[iii] is the main regulatory body that has primary responsibility for granting licenses to any individual or entity that desires to carry on banking business[iv] and the business of other Financial Institutions[v] including FinTech Companies in Nigeria.
Any FinTech Company which, before the enactment Banks and Other Financial Institutions Act (BOFIA), 2020 (the Act that establishes the CBN) carries on the business of other Financial Institutions without being duly licensed by the CBN is required to obtain license in accordance with the Act.[vi]
The Securities and Exchange Commission (SEC):
SEC develops and regulates the Nigerian Capital Market with the view of protecting investors and enhancing efficiency. FinTech Companies that provide services in the Nigerian Capital Market such as E-Dividends, Direct Cash Settlement and Dematerialization, registration of securities, Capital Market surveillance, etc. will be required to register with SEC. Every Collective Investment Scheme is to be registered with SEC.[vii] Fintech Companies that are desirous of raising funds through the Capital Market are also required to register with SEC.[viii]
Other regulatory bodies include: The Nigerian Communication Commission (NCC), the Nigeria Deposit Insurance Corporation (NDIC), National Information Technology Development Agency (NITDA), the Federal Competition and Consumer Protection Commission (FCCPC).
The Regulatory Requirements for Fintech Companies in Nigeria:
This is a mandatory requirement and it is the first leg in the wheel of doing business in the FINTECH space in Nigeria. Before any FinTech Company can transact business in Nigeria, it must be registered or incorporated with the CAC except the company exempt by the Commission.
In incorporating a FinTech Company, essential requirements such as the minimum issued share capital, shareholding, directorship, etc. must be considered by the promoters of the FinTech Company in order to ensure compliance with existing laws and regulations.
FinTech Companies must be duly licensed by the licensing authorities before providing financial services. The CBN is charged with this mandate except as exempted under the BOFIA 2020.[ix]
Other requisite license(s) may be obtained from SEC[x], NDIC and NCC depending on the nature of services to be rendered. FinTech Companies may also be required to obtain licenses/approvals from NCC, or other agencies authorised to grant licenses by virtue of any existing laws or regulations.
3. DATA PROTECTION
FinTech Companies are required to ensure that the data provided by their users and stakeholders are protected except when exempted by law. The 1999 Constitution of the Federal Republic of Nigeria (as amended), CBN Cyber-based Security Framework and Guidelines for Deposit Banks and Payment Service Providers 2018, Cybercrime (Prohibition, Prevention, Etc.) Act 2015, Nigerian Data Protection Regulation 2019, Nigerian Communications Commission (NCC) Draft Consumer Code of Practice Regulations 2018 are some of the data laws which FinTech Companies are required to comply with in Nigeria.
4. KYC/AML POLICY
FinTech companies are also required to maintain and be guided by a robust Know-Your-Customer/Anti-Money Laundering Policies. This is to mitigate against financial fraud including financing terrorist activities.
The KYC/AML Policy of every FinTech Company must be in line with requirements provided by existing laws, regulations and international best practices. Some of these laws and regulations include; Money Laundering (Prohibition) Act, 2011 (as amended), Money Laundering (Prohibition) Act 2011, Advanced Fee Fraud and other Fraud Related Act 2006.
There is no doubt that the FinTech space in Nigeria is fast evolving and has attracted tremendous interests both locally and internationally. The importance of making sure you comply with the laws and regulations which govern FinTech Companies in Nigeria cannot therefore be overemphasized. In order for you to legally operate in Nigeria as a FinTech business you must ensure that the company is duly incorporated, have all requisite licenses and approvals and are constantly abreast with what can only be described as a fast-paced regulatory landscape.
Please note that the content of this Article is for general guidance on the Subject Matter. It is NOT and is not to be taken as giving legal advice.
[i] Finextra (2016) ”What is FinTech and Where Does it Live” Available at URL: https://www.finextra.com/blogposting/12890/what-is-fintech-and-where-does-it-live Accessed 24th May, 2021.
[ii] Section 8 Companies and Allied Matters Act, 2020.
[iii] Established under Section 1 of the provisions of the Banks and Other Financial Institutions Act (BOFIA), 2020.
[iv] Section 2 and 131 of the Banks and Other Financial institutions Act, 2020
[v] Section 57 and 131, Ibid
[vi] Section 57 (3), Ibid
[vii] Section 54 and 153 of the Investment and Securities Act, 2007
[viii] Global Legal Insights (2020) “Fintech 2020|Nigeria” Available at URL: https://www.globallegalinsights.com/practice-areas/fintech-laws-and-regulations/nigeria Accessed 24th May, 2021.
[ix] Section 57 BOFIA 2020