NDIC to modernise processes with fintech solutions
The Nigeria Deposit Insurance Corporation (NDIC) has revealed its concerns over the growing number of financial technology (fintech) companies in Nigeria.
NDIC is responsible for protecting depositor’s money in banks. It insures bank deposits up to a maximum of N500,000 per account. For this purpose, it collects deposit insurance premium from banks and in the event of a bank failure, it pays depositors the maximum insured deposit.
Among other things the Corporation said it is concerned about how to identify and insure non-bank deposit taking institutions licenced by CBN and other regulatory agencies.
Chief Executive Officer of NDIC, Umaru Ibrahim disclosed this in Kaduna at the seminar organized for business editors and finance correspondents.
“Currently, there is an ongoing engagement with the relevant regulatory agencies on how to actualize that within the limits of legal provision”, he added.
He said NDIC is also concerned about how to tap into the potentials of Fintechs to effectively execute its business processes easily, speedily and reliably.
In this regard, Ibrahim disclosed that NDIC has decided to modernise its data collection and analysis through the use of Fintech solutions/tools (Regtech and SupTech) to handle the following business processes better than currently being done: Risk Based Supervision (RBS), Monitoring Compliance, Premium Administration, Early Warning Signals, Stress Testing, Analysis of insured institutions’ performance.
Highlighting the benefits and risks associated with fintechs, the NDIC boss said: “FinTech is simply the common term used to describe the technology (internet, mobile devices, software app, cloud services and many more) that are used in delivering important financial services that were exclusive to traditional financial institutions.
“Despite promising innovation and economic growth through disruption of traditional finance, Fintech disruptive financial services such as chip-based debit/credit cards, mobile and web-based payments cloud computing also poses a major challenge to the regulatory paradigm.
“There is increasing evidence that Fintech innovations have many advantages for businesses and customers. The World Economic Forum, 2017, suggests Fintech is “disruptive”, “revolutionary”, and armed with “digital weapons”, that will “tear down” traditional financial institutions. Fintech will enhance market competition and financial inclusion.
“However, the increasing sophistication and proliferation of technology in banking operations also ushered in unintended consequences like operational and legal risks, as well as the security of consumer personal data. The recent experiences of technology giants selling consumer data without consent or authority is cause for concern.
“Managing the risks associated with emerging technology without stifling innovation has become a major theme amongst regulators and policy makers. In Nigeria for instance, the Central Bank recently released a draft framework for regulatory sandbox operations to encourage innovation, especially for Startups. The NDIC equally established an ‘Innovation and Fintech Unit’ to drive its agenda for emerging technology and provide solutions to improve the safety of depositors and the banking system.”
On the growth of fintechs in Nigeria, the NDIC CEO said: “According to McKinsey & Company, Nigeria is now home to over 200 fintech standalone companies, plus a number of fintech solutions offered by banks and mobile network operators as part of their product portfolio. Between 2014 and 2019, Nigeria’s bustling fintech scene raised more than $600 million in funding, attracting 25 percent ($122 million) of the $491.6 million raised by African tech startups in 2019 alone—second only to Kenya, which attracted $149 million.
“From the foregoing, it becomes evident that the theme of this conference is informed by emerging developments in the Fintech space and the expected long-term effects of the pandemic on the financial system, which will largely be determined by our actions in promoting innovation while also strengthening bank stability.”