Compliance Considerations for Aspiring Fintech Startups in Nigeria

Launching a fintech company goes beyond simply having an idea for an app, and reaching out to a random developer... and one day, hope to be like the big tech guys, cashing out. Have you thought about compliance?

For the last few weeks, there has been an increase in the number of enquiries we get from budding fintech entrepreneurs in Nigeria who want to be the next Opay, Kuda, Paystack, Binance, and not surprising, Bill Payment apps.

While we applaud the entrepreneurial spirit of young Nigerians, it is imperative we admonish fintech founders to consider the importance of compliance if they must do business the right way, else the government might charge them with “operating banking services without license” or for “sponsoring terrorism.”

What should you consider when launching a fintech startup?

1. Understand Regulatory Requirements

Thoroughly research the specific regulatory requirements for your fintech segment. Different activities such as payment processing, lending, and insurance have distinct compliance needs regulated by bodies like the Central Bank of Nigeria (CBN), Nigerian Deposit Insurance Corporation (NDIC), and Securities and Exchange Commission (SEC).

2. Obtain Necessary Licenses and Approvals.

Identify and secure the appropriate licenses for your operations. Common licenses include Payment Service Bank (PSB) licenses, Mobile Money Operator (MMO) licenses, and Payment Terminal Service Provider (PTSP) licenses. The licensing process involves application submissions, meeting capital requirements, and paying necessary fees.

3. Implement Robust KYC and AML Policies.

Establish comprehensive Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures. This includes verifying customer identities, monitoring transactions for suspicious activities, and reporting any suspected illegal activities to the Nigerian Financial Intelligence Unit (NFIU).

4. Ensure Data Protection and Privacy Compliance.

Adhere to the Nigerian Data Protection Regulation (NDPR) to safeguard user data. Implement secure data storage solutions, obtain clear user consent for data collection, and comply with data breach notification requirements. Protecting user privacy builds trust and loyalty.

5. Engage Legal and Compliance Experts.?

Work with professionals specializing in fintech regulations to navigate the complex legal landscape. They can provide guidance on regulatory compliance, assist with the licensing process, and help develop a strong compliance framework.

6. Develop a Consumer Protection Framework.

Implement measures to protect consumers, such as clear terms of service, transparent fee structures, and accessible dispute resolution mechanisms. Educate your customers about their rights and responsibilities to foster trust and a positive reputation.

7. Leverage Technology for Compliance.

Utilize Reg Tech solutions to streamline compliance processes. Automated tools for KYC/AML checks, fraud detection, and data privacy management can enhance efficiency and accuracy, allowing you to focus on innovation and growth.

By ensuring these steps, you will lay a solid foundation for your next fintech startup.