INTRODUCTION
The traditional banking system was defined by structural inefficiencies which included high cost of transactions, limited financial access, lack of transparency, and most of all dawdling service delivery. Customers’ financial data was held exclusively by banks, thereby limiting innovation and customer choice.
The emergence of financial technology (fintech) exposed these systemic gaps and highlighted significant legal and regulatory deficiencies and imbalance particularly in data ownership, market access and consumer rights. Hence, regulators across the globe introduced open banking frameworks, designed to legally recognize customer rights over financial data, promote competition, and create a secure environment for innovation in the financial sector. Nigeria became the first African country to
establish a framework for Open Banking, reflecting its commitment to strengthening financial inclusion and promoting a modernized regulatory landscape.
Open banking system is a regulated system that allows bank customers to securely share their financial data with authorized third-party providers via a well-designed and purpose-driven Application Programming Interfaces (APIs). Open banking is applicable in credit scoring and rating, agent banking, financial inclusion, and know your customer (KYC). It also aids to maintain budget, access credit facilities, and conveniently manage money.
