The Central Bank of Nigeria (CBN) has released a draft framework for regulatory sandbox operations aimed at controlling innovation in the fintech sector.
The new sandbox will contain a formal process for firms and startups to conduct live tests of all-new, innovative products, services, delivery channels or business models.
With the new system, all fintech innovation will have to go through a controlled environment with regulatory oversight, subject to appropriate conditions and safeguards set by the CBN.
The sandbox application process is open to both existing CBN licensees such as financial institutions and other companies, including technology and telecom companies intending to test innovative payments products they want to be licenced or acceptable to the CBN.
New Fintech innovation that require CBN licence or acceptance will have to pass an evaluation in the regulatory sandbox
Application for a proposed solution which involves technologies which are not covered under existing CBN regulations is also accepted.
Aftermath of Rapid Innovation in Nigerian Fintech
Following the innovation boom in the Nigerian fintech space and the consequent increase in consumer appetite for digital (payment) financial solutions, the CBN is finally wading in to create a form of oversight in the sector.Fintech solutions are on the increase in Nigeria
The regulatory body with its framework for regulatory sandbox operations wants to control how emerging disruptive technology affects the financial services space.
The framework defines the establishment, rules and operations of a regulatory sandbox for the Nigerian payments system.
Promoting Competition and Boosting Financial Inclusion
According to the CBN, the new sandbox will help promote effective competition as well as embrace new technology that encourage financial inclusion.
The agency added that it will also help improve customer experiences as all-new innovation will be tested to see if they are consumer-friendly.
The Future of the Nigerian Fintech Sector
Before now, Fintech startups had the privilege of doing pilot launches of new innovations without necessarily getting acceptance from the CBN. However, with the release of the new regulatory sandbox, new innovators will now have to get a Letter of Approval (LoA) to test their innovations.
The regulatory body claims that the new framework will reduce time-to-market for innovative products, services, and business models. However, with the CBN having full control over innovation in the sector, there is a possibility that highly disruptive innovations that have the capacity to shake-up the sector could be shut down.
Apart from controlling innovation, the new framework also clearly defines the roles and responsibilities of stakeholders in the operations of the sandbox for the Nigerian payment industry.
In summary, innovators in the fintech sector will now have to get a letter of approval to test out their innovation in the sandbox. According to the CBN, the framework will ensure adequate provisions in regulations to create an enabling environment for the entry of new innovation without compromising the safety of consumers and the reputation of the fintech sector.
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