One month after a ban on onboarding new customers, fintechs are still at the negotiating table with regulators.
Five Nigerian neobanks—Moniepoint, OPay, Palmpay, Kuda, and Paga—remain unable to onboard new customers one month after a TechCabal report revealed the restriction was connected to a directive from the National Security Adviser (NSA). The leaders of those neobanks met with the NSA, the Economic and Financial Crimes Commission (EFCC), and the Central Bank of Nigeria (CBN) in Abuja on Friday, April 26, two people familiar with the talks said.
In those talks and continuing engagements, the fintechs were given conditions before new account openings could resume.
If those talks stall, it will slow growth for the venture-funded neobanks that have benefited from an explosion in digital payments. It also highlights the weak lobbying power of fintech as they continue to face scrutiny over Know Your Customer (KYC) procedures and fraud prevention.
According to one person familiar with the talks, the neobanks have been asked to restrict peer-to-peer crypto transactions. It aligns with a plan by authorities to ban P2P crypto trading, first reported by TechCabal after the NSA classified crypto trading a “national security issue.”
One neobank executive said banning P2P transactions was “impossible” because there’s no way to know if a transaction is crypto-related. Since Nigeria’s initial ban on crypto, traders quickly learned to avoid adding descriptions or comments in transactions.
Despite the complex nature of the request, the neobanks have sent notifications to customers warning that P2P transactions will be blocked and reported to authorities.
The neobanks have also been asked to update customer details and mandate bank verification numbers or national identity numbers for all tiered accounts in line with a December 2023 directive. That directive mandates valid identification for all types of accounts, strengthening KYC processes that were initially relaxed to boost financial inclusion.
Last week, Palmpay asked customers to complete facial recognition verification before May 31st or face account restrictions while Kuda asked customers to upload proof of their house addresses before the same deadline. Other affected neobanks will also ask customers to update their details in the coming weeks, an executive at a neobank told TechCabal.
These conditions will compel the fintechs to enhance their KYC processes and ensure they comply with the CBN’s new KYC rules, one person with knowledge of the talks said. The conditions will also change what regulators perceive to be a crypto-friendly attitude on the part of the fintechs.
The government’s hard stance on crypto trading began in February 2024 after it arrested two Binance executives. In April, the Economic and Financial Crimes Commission blocked 1,146 bank accounts involved in “unauthorised forex dealings.”
The Securities and Exchange Commission (SEC) also held a meeting in May asking crypto exchanges to delist the p2p feature. Kucoin, a popular crypto exchange paused its p2p trading last week.
The fintechs and crypto players have no leverage in these talks, one former CBN insider shared. Attempts to band together and lobby the government have led nowhere, with one fintech executive claiming that the initial plan to present a united front to the regulators was ignored by industry players.
In 2023, a plan to convene fintech players to fight fraud similarly led nowhere, highlighting how intense rivalry may complicate cooperation. Traditional banks on the other hand, routinely cooperate and wield some influence with the regulators.
For the affected fintechs, the lifting of the ban cannot come soon enough.
*Additional reporting by Muktar Oladunmade
