Nigerian fintech firms have been cutting off the government from identity verification systems while the government made it hard for these companies to thrive so let’s see more in our latest crypto news today.
The analysts said that it is highly related to the government’s wishes to streamline identity verification but without having a functioning alternative, the Nigerian fintech firms cannot take on new customers which are making a huge problem for these companies. The fintech companies were cut off from the government service that they need in order to conduct mandatory identity checks on their customers. While they are waiting for the government to install a new system, the companies are not able to legally onboard new customers so they have to wait for the system to work. Oluwaseun Opeyami who is a lawyer in Nigeria’s capital Lagos said:
“The timing of this move couldn’t be worse, especially given all the recent regulatory obstacles that fintech has faced this year, like the ban on banks dealing with crypto. “
Nigeria’s fintech bubble about to pop!
BVN identity verifications for nonbanks have been shut down https://t.co/OnmYlk8s4z
— Kioneki (@pesa_africa) April 9, 2021
The blackouts added another hurdle for the companies which are not very encouraging signs for the foreign investments in Nigeria. Like so many other countries, Nigerian law requires fintech companies to verify the customers’ identity, and to do so, businesses in Nigeria rely on the governments’ seven-year-old verification database which is called the Bank Verification Number. A regulatory directive however suspended the fintech companies from accessing the BVN without warning.
There wasn’t any explanation why but it could have been because the government is replacing its patchwork network of identity systems where BVN is only one part with a slicker identity system like the National Identification Number NIN. The NIN functions like America’s social security number and consolidates the identity information in one number. With all attempts to streamline verification, the government left fintech companies dry with most people haven’t yet switched to the new NIN system and not having the tools to query the new database according to Oladimeji.
This leaves the fintech companies in a very rough spot according to the CEO of Dan Holdings, Danny Oyekan. To remain compliant, the Nigerian fintech firms will return to expensive identity verifications methods that predated the BVN as per Oluwaseun Esq like checking information via other institutions. However, these methods will impose more costs on the businesses’ side.