Some group of Experts in Nigeria has called on the Central Bank of Nigeria (CBN) on the need for regulation and transparency of digital banks to protect customers’ deposits.
This caution is coming amid the recent cash shortage in Nigeria that has seen a large percentage of Nigerians turn to digital banks, which mostly operate with mobile apps for their banking activities.
Reports disclose that most digital banks often used by Nigerians are operating under the license of Microfinance banks (MFBs) which can pose problems to customers in the long run, knowing full well that the majority of these digital bank do not have the licenses to operate in the country.
It would be recalled that in November 2020, the Central Bank of Nigeria revoked the license of forty-two (42) microfinance banks. The CBN made it clear that these 42 MFBs have been out of operation for some time, and so, the revocation was necessary to protect citizens’ deposits.
There are concerns that the high rate of usage of these bank apps which experts disclose might pose a serious challenge in the future as much is not known about them. Most do not have physical buildings where one can go to make complaints or inquiries, and their customer care lines are disclosed to be somewhat unreliable, unlike traditional banks.
Investors King understands that if a customer loses his money in any of the traditional banks, there are provisions in the Nigeria Deposit Insurance Company (NDIC), the asset management Corporation in Nigeria to recover the money, but not much is known about that of the new generation of Digital Banks which makes it highly risky.
Experts have however lauded the operations of these banks in the country for alleviating the plight of citizens, meanwhile, they have urged the Central Bank to come out and reassure Nigerians of their operations in the country. They also stated that it is ideal for the citizens to know the people behind these banks, as much is not known about them which gives room for skepticism.
It is interesting to note that before now, traditional banks and other financial institutions were the primary providers of financial services. However, with rapid technological advancement, digital banks like Kuda Microfinance Bank, Opay, Vbank, etc are now competing with traditional banks to provide financial services.
The primary focus of these digital banks is to drive financial inclusion using technology. Thus, they seek to reach out to the unbanked populace that traditional banks have not yet captured.