Fidelity Bank, a leading Nigerian commercial bank, has taken a significant step by blocking consumer fund transfers to neobanks, including Moniepoint, Kuda, OPay, and PalmPay, due to growing apprehensions surrounding their Know Your Customer (KYC) procedures. This move follows increasing instances of fraud, posing challenges to the Nigerian banking and fintech sectors.
Customers initially noticed that these neobanks were no longer listed on Fidelity Bank's approved financial institutions within the bank's mobile app. While Fidelity Bank informed its customers that these restrictions were related to an app upgrade, sources within the fintech industry offered a different perspective.
Multiple individuals with direct knowledge of the situation revealed that the transfer restrictions began at least two weeks ago, prompted by mounting concerns over fraud and customer verification. Despite OPay's denial of being affected, customer complaints indicated otherwise. Representatives from PalmPay mentioned that Fidelity Bank had informed them of system upgrades, while Moniepoint confirmed the restrictions.
Sources connected to Fidelity Bank stated that the restrictions stem from increasing fraud losses. As of this year, Nigerian banks and fintech companies have experienced substantial losses attributed to cyberattacks and fraudulent activities. The main concerns appear to revolve around due diligence and KYC procedures.
Neobanks often rely on third-party verification companies to remotely collect and verify customer information, using digital documents and biometric verification. While this method offers speed and convenience, traditional banks argue that it may not always be sufficient.
The situation has also raised questions about whether a bank can unilaterally restrict transfers to another bank. Currently, the Central Bank of Nigeria (CBN) Customer Due Diligence Regulations 2023 does not provide explicit guidance on this issue. However, it underscores the importance of risk management frameworks and due diligence practices within the industry.
Source: Tech Cabal
Customers initially noticed that these neobanks were no longer listed on Fidelity Bank's approved financial institutions within the bank's mobile app. While Fidelity Bank informed its customers that these restrictions were related to an app upgrade, sources within the fintech industry offered a different perspective.
Multiple individuals with direct knowledge of the situation revealed that the transfer restrictions began at least two weeks ago, prompted by mounting concerns over fraud and customer verification. Despite OPay's denial of being affected, customer complaints indicated otherwise. Representatives from PalmPay mentioned that Fidelity Bank had informed them of system upgrades, while Moniepoint confirmed the restrictions.
Sources connected to Fidelity Bank stated that the restrictions stem from increasing fraud losses. As of this year, Nigerian banks and fintech companies have experienced substantial losses attributed to cyberattacks and fraudulent activities. The main concerns appear to revolve around due diligence and KYC procedures.
Neobanks often rely on third-party verification companies to remotely collect and verify customer information, using digital documents and biometric verification. While this method offers speed and convenience, traditional banks argue that it may not always be sufficient.
The situation has also raised questions about whether a bank can unilaterally restrict transfers to another bank. Currently, the Central Bank of Nigeria (CBN) Customer Due Diligence Regulations 2023 does not provide explicit guidance on this issue. However, it underscores the importance of risk management frameworks and due diligence practices within the industry.
Source: Tech Cabal
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