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Lack of synergy between regulators, fintech developers killing innovations—BHIU

Leading independent market research arm of Business Hilights Group, the Business Hilights Intelligence Unit (BHIU), has released its third quarter report on the Nigerian Financial Sector, saying the major drawback in the growth of Financial Technology (FinTech) sub-sector of the economy is the wide gap between fintech developers and government regulatory agencies.

The report released Monday in Lagos, showed that “Within the expanding tech innovation developing space, issue of bureaucracies displayed during testing applications and software by relevant agencies discourage several Nigeria tech start-ups.”

“Another factor closely related to the above is the confusion created by supervising inter-agency rivalry and resolving the linkage differences between the supervising agencies and meeting all their provisions ahead of coming up with a software that has no form of breach amongst all the numerous agencies.

The report decried that “Experiences and reports by fintech developers show that “It takes a great deal of time for FinTechs to test their solutions and ensure that they are ready for the market.”

“Besides, the worst case scenario is the ugly experience of many developers who only discover that their products have somehow, somewhat breached one almost unmentioned regulation which the particular agency has never created any form of awareness before software developers.

It added that “sometimes, an agency of the federal Government will suddenly come up with a regulation without any form of public hearing or prior notice and clog on the wheel of fintech developers’ progress.

BHIU averred that “whereas new innovative technologies are driving fundamental changes in the financial ecosystem, there is need for regulatory agencies especially NITDA, CBN and the SEC to always carry fintech innovators along in regulatory changes to avoid cases of keeping cart before the horse in the course of regulating the fintech industry.

Business Hilights recalls that regulators in the financial ecosystem play an important role in establishing safety and trust in the financial system for the usability and safety of products and players so as to maximise opportunities and ensure Fintech compliance.

For example, the SEC, Securities and Exchange Commission recently unveiled what it termed a regulatory sandbox, which it said is a controlled environment that offers a ‘safe space’ in which start-ups and other businesses can test innovative products, services, business models and delivery mechanisms relating to the financial and capital markets in a live environment without immediately satisfying all the necessary regulatory requirements.

During the course of discussions at Nigeria Fintech Week organised by Fintech providers, in partnership with Fintech Association of Nigeria (FinTechNGR) in Lagos, participants argued that more needed to be done in the areas of regulation.

Experts want regulators to set fintech development benchmarks early enough to ensure that FinTech apps comply with regulations stipulated by the companies running the application’s underlying infrastructure to mitigate risks and waste of resources.

This observation forced the Corporate Innovation and Fintech Adviser, Ambassador, Stone and Chalk Australia, Andrew Davis, to decry that “Some regulators in various markets are not actively supporting fintech due to their shallow knowledge of the ecosystem.”