Open Banking: CBN Urges Nigerian Banks and Fintechs to Prioritise Cybersecurity
The Central Bank of Nigeria (CBN) has issued a caution to banks and fintech companies across the country, emphasising the cybersecurity risks associated with the rise of open banking.
Speaking during the Q2 Regulators Forum of FintechNGR, themed “Beyond Compliance: Unlocking Innovation with Nigeria’s Open Banking Framework”, Mr. Musa Jimoh, Director of Payment System Policy at CBN, stressed the urgent need for financial institutions to invest in airtight security measures.
Why Cybersecurity Is Critical in Open Banking
According to Jimoh, open banking involves the sharing of sensitive customer data with trusted third parties via Application Programming Interfaces (APIs). While this fosters innovation and seamless digital services, it also introduces potential vulnerabilities.
“Open banking should not become an open door for cybercriminals,” Jimoh warned. “The security around our APIs, payment infrastructure, and customer data must be unbreakable.”
Protecting Customer Data Must Be a Priority
Jimoh highlighted that under the open banking framework, customers will consent to have their account information shared with third-party firms. He emphasised two key responsibilities for service providers:
- Transparent consent processes
- Strong data security standards
Financial institutions must ensure customers fully understand what data is being accessed, who is accessing it, and for what purpose.
Additionally, customer education is vital in safeguarding against phishing, social engineering, and other forms of cyber fraud that may exploit open banking systems.
Unified Standards for Seamless Integration
The CBN also underscored the need for standardised API protocols across all Nigerian banks to ensure interoperability. With consistent standards:
- Fintechs can integrate more easily
- Innovation can scale faster
- Consumers can enjoy more consistent experiences
“Once your system is configured, you can connect to any bank you’re authorized to access,” Jimoh said, explaining how standardized integration simplifies the open banking ecosystem.
Nigeria Leads Africa in Open Banking Regulation
Nigeria made history on March 7, 2023, by becoming the first African country to establish a formal open banking regime, following the release of the CBN’s Open Banking Operational Guidelines.
These guidelines define how:
- Banks and licensed institutions should access and share customer data
- Customer consent is obtained and managed
- API frameworks should function securely and uniformly
What Is Open Banking and How Does It Work?
Open banking is a financial services innovation that enables data-sharing between banks and licensed third-party providers, such as fintechs, with customer consent. Here’s how it works:
- Customers grant permission for third parties to access their data
- Data is shared securely through APIs
- Shared information may include transaction history, account balances, and more
- Third-party providers use the data to create tailored financial services
This system is designed to drive financial inclusion, foster innovation, and increase competition in the banking sector.
Key Takeaways
- The CBN warns Nigerian banks and fintechs about cybersecurity risks in open banking
- Customer data security must be prioritised through strong API protections
- Customer education and consent are vital to prevent fraud
- Nigeria leads Africa as the first country with formal open banking guidelines
- Open banking enables data-sharing for innovation, but requires robust cybersecurity frameworks
