In response to a directive from the Central Bank of Nigeria (CBN), leading fintech companies such as Kuda Bank, Moniepoint, OPay, and Palmpay have temporarily suspended the opening of new accounts for customers. This move comes just two days after the Economic and Financial Crimes Commission (EFCC) blocked 1,146 bank accounts implicated in unauthorized forex transactions.
A notice prominently displayed on the website of a major fintech startup informed users about the suspension, stating, “We’ve temporarily paused new signups on our platform. This means that you’ll be unable to open a new account at the moment. We apologize for any inconvenience this may cause.” At present, attempts by TechCabal to initiate new accounts on affected fintech platforms have proven unsuccessful.
ALSO READ: EFCC Freezes 300 Suspected Illegal Forex Accounts
Despite this suspension, existing customer deposits and banking activities remain unaffected.
This development underscores the intensifying scrutiny that fintech companies have faced in recent times. Last October, concerns over lax Know Your Customer (KYC) procedures prompted Fidelity Bank to suspend transfers to OPay, Palmpay, Kuda, and Moniepoint, citing a surge in fraud incidents. Subsequently, the Central Bank introduced new KYC regulations for all financial institutions, with particular implications for fintech startups.
The recent directive to suspend new account openings is reportedly linked to an ongoing audit of the KYC processes of these fintechs. Sources familiar with the matter indicate that representatives from the affected fintechs engaged in discussions with the Central Bank and the National Security Agency (NSA) on April 26. Discussions revealed concerns about the potential exploitation of fintech platforms by crypto traders to disrupt the foreign exchange market. Moreover, it was noted that traditional banks enjoyed a more favorable relationship with regulators compared to fintechs, affecting their standing with the Central Bank.
An executive at one of the affected fintechs suggested that the directive may be connected to the EFCC’s investigation into bank accounts involved in unauthorized forex transactions. However, an analysis of the blocked accounts reveals that only a small fraction are associated with fintechs, with the majority belonging to commercial banks.
Despite speculation, an NSA spokesperson has denied any direct involvement in the directive to suspend new account openings.
In recent months, the Central Bank has taken decisive action against perceived threats to financial stability. In March, allegations of naira manipulation led to a crackdown on Binance, a global cryptocurrency exchange, resulting in charges of tax evasion and money laundering against two of its executives. Additionally, in December, the CBN introduced stricter ID card requirements for opening financial accounts, contradicting previous regulations aimed at enhancing financial inclusion.
As fintech companies navigate this challenging regulatory landscape, the implications of the CBN’s directives continue to reverberate throughout the industry, raising questions about the future of innovation and financial inclusion in Nigeria.
Credit: TechCabal (Text Excluding Headline)
