- Introduction
Software is eating financial service delivery in Nigeria. Fintech is daily expanding its offerings to enhance customer satisfaction and leverage technological evolution. With these modern developments come problems such as consumer protection, financial exclusion due to insufficient literacy, increased exposure to fraud, etc.
To address some of these issues, the Central Bank of Nigeria (CBN) has taken a range of measures including the recent release of the draft Digital Financial Service (DFS) Awareness Guidelines (the “Guidelines”). We consider its core objectives and some of its key provisions in this article.
- Objectives and overview of the DFS Awareness Rules
Some of the objectives for which the Guidelines have been introduced include the provision of digital financial literacy standards for DFS providers, enhancement of transparency of service providers, integration of financial education into service offerings, etc.
This follows several attempts taken by the apex bank to address the financial inclusion problem including the introduction of the National Financial Literacy Framework. It appears the CBN intends to enhance customer satisfaction by providing these standards to guide financial service delivery in their various forms.
The draft Guidelines have 6 core principles upon which it provides some obligations for DFS providers. The principles are outlined below;
- Promotion of DFS awareness and education;
- Disclosure, transparency, and user privacy upon service adoption;
- Product usability and market testing;
- Fraud prevention and risk management;
- Awareness and access to redress and complaints handling; and
- Monitoring and evaluation.
- Key provisions
- Scope of applicants
The CBN makes it quite clear from its draft Guidelines that it will apply to banks and Other Financial Institutions (OFI). The CBN further specifically named payments service banks, merchant banks, and other licensed payments service institutions as entities covered by the draft DFS Awareness Guidelines.[1]
It appears the initiative is driven largely by deposit-taking institutions and payment companies to tackle the ongoing fraud problem. We may also conclude that fintech, the core driver of DFS in Nigeria, is the major target of the Guidelines.
- Compliance obligations
The financial services industry is heavily regulated requiring robust compliance programs. The draft DFS Awareness Guidelines introduces a few more obligations and promises sanctions for non-compliance. Some of them are;
- Customer education
DFS providers will now be required to provide education and information initiatives in varying forms to their customers and underserved populations.[2] To comply with this objective, DFS providers may engage licensed value-added service aggregators to leverage SMS and USSD channels.
This obligation extends to include the provision of fraud prevention tips to customers on a regular basis. As DFS providers learn of new fraud risks based on an assessment of reports made, they are expected to provide sensitization to customers on how they can protect their assets.[3]
- Periodic usability tests and support enhancements
The Guidelines now require DFS providers to engage in frequent product usability testing to ensure it meets the needs of the end users.
Furthermore, DFS providers are required to make reasonable provisions to allow customers to access support services through reliable channels. We expect this to include social media channels and formal complaint channels such as emails and in-app customer service.
- Complaint handling and transparent service delivery
DFS providers are now required to disclose their complaint channels and information on dispute resolution procedures at the point of customer onboarding. Aside from this disclosure obligation, they must also conduct periodic training for their complaint handling teams.[4]
Further to this, the Guidelines make provisions for user privacy and primacy of choice. This includes consent requirements for data sharing and mandatory provision of clear opt-in and opt-out languages.[5]
- Returns and reporting obligation
DFS providers will be required to file some periodic returns to the CBN pursuant to the new guidelines.[6] Some of these are highlighted in the table below;
| Report | Timeline | Receiving Department/Addressee |
| Report on DFS strategy and performance measures | Bi-annually | Director, Consumer Protection Department, CBN. |
| Return on consumer awareness programs/initiatives | Monthly | Director, Consumer Protection Department, CBN. |
- Conclusion
The draft Guidelines contain significant provisions that may change the face of digital financial service delivery in years to come, if passed. However, there are concerns as to duplication of regulatory efforts among other key criticisms levied against the draft provisions. Nonetheless, stakeholder engagements as requested by the CBN could help fine tune the Guideline to meet global standards.
[1] Section 1.2. Draft DFS Awareness Guidelines 2022
[2] Section 2.1. Draft DFS Awareness Guidelines 2022
[3] Section 2.4. Draft DFS Awareness Guidelines 2022
[4] Section 2.5. Draft DFS Awareness Guidelines 2022
[5] Section 2.2. Draft DFS Awareness Guidelines 2022
[6] Section 2.6. Draft DFS Awareness Guidelines 2022
