What these new fintech licenses mean for the Nigerian fintech space
Today, we live in a global ecosystem where technological advances are taking over many industries and driving change in the way products and services are being delivered to end-users. The financial industry is not left out as fintechs have disrupted the traditional banking and payment systems, reaching the unbanked through innovative solutions and carving out a niche for themselves through process automation, improved customer service, user-friendliness and overall convenience.
The rapid growth of the fintech space has not passed beneath the radar of regulatory bodies like the Central Bank of Nigeria (CBN) and the Securities and Exchange Commission (SEC), and different sectors in the fintech industry are now being brought under regulatory oversight.
Earlier this year, for example, the SEC stopped (unregistered) investment platforms from offering foreign stocks to Nigerians. A secular put out by the commission partly stated, “… only foreign securities listed on any Exchange registered in Nigeria have the permission to engage in any of form of transaction with the Nigerian public.”
Despite these regulations, the fintech space is still thriving as top players such as Chaka, an investment platform, and Cowrywise, a fintech company have taken steps to comply with the regulatory requirements.
Chaka recently acquired the “Digital Sub-Broker/Sub-Broker Serving Multiple Brokers Through a Digital Platform License” by the SEC. This makes Chaka the first recipient of this newly created license.
Cowrywise also received a fund/portfolio management license from Nigeria’s Securities and Exchange Commission (SEC).
What does this license mean to the fintech space?
In a conversation with Chaka last week, the fintech company told Nairametrics what the license means to them and how it affects their business. The Digital Sub-Broker license gives them the right to continue to offer digital investment solutions to Nigerians as they continue to promote retail participation and financial inclusion within the local market.
According to them, “It also enables us to continue to serve as a platform to power other brokers. In line with this, we have just launched a new Chaka app for retail investors, Chaka SDK to enable asset managers and financial institutions to offer digital investments to their customers, Chaka for Business to enable direct business onboarding, and provide powerful trading tools for institutional investors.”
For Cowrywise, the license will enable the business to operate as a full-fledged portfolio management company. With this, the company is making its investment APIs to help fund managers across the world to access its services and open up more investment options to serve customers in Nigeria better. Any company interested in offering investment services to its users can avoid years of regulatory, legal, and technical hurdles by embedding Cowrywise investment features into their services and connecting their customers to high-quality investment products that will enable them to grow and manage their money.
What the future holds for Nigeria’s fintech space
Nigeria’s fintech space has experienced considerable heat from regulatory bodies this year with many having their services disrupted in the process. However, the communications lines have been opened between the fintechs and the industry regulators creating opportunities for better understanding and collaborations between both parties.
The new licenses being rolled out are evidence of improving relationships between the industry players and the regulatory agencies. Not only do they satisfy the government’s requirements for operating within the Nigerian space, but they also inspire trust in end-users who can carry out their transactions with the assurance that they are dealing with duly certified and regulated organisations.
The Securities and Exchange Commission has also stated severally, that it will continue to engage players in the fintech space, extending invitations to them to commence the regulatory registration process, assuring players that startups that meet the requirement for a license will be given one. This augurs well for the ecosystem in the long term and is a win-win for all stakeholders.
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