Nigeria's API-based open banking initiatives offer a model for Africa

Although banks in sub-Saharan Africa have expanded their customer base, there still is a huge population that is underserved. API-based open banking helps enterprises reach these potential customers, while cutting costs associated with risk assessment and the development of new payment, transaction and lending services.

nigerian nairas stacked bills african currency bank notes by ppart gettyimages 613034832
ppart / Getty Images

Although banks throughout sub-Saharan Africa have expanded their customer base in recent years, there still is a huge population that is underserved and locked out of the financial ecosystem due to cost and lack of access to services.

This has prevented enterprises from reaching large segments of the population. Nigeria is combatting the problem by promoting open banking, which embraces the use of APIs to allow exchange of data among merchants, service providers and financial institutions.

IT leaders in enterprises can take advantage of the growth of open-banking services to enable their businesses to reach new customers, and streamline their back-office and transaction processes.

Open banking also aids financial inclusion in a variety of ways, for example by allowing lenders and merchants to check on payment history of customers who do not have traditional bank accounts, and by enabling very small businesses to offer a range of payment services that in the past would have been too expensive to implement.

Nigeria's approach is different than that taken in other countries — namely, mobile money, led by service providers in East Africa. Mobile money providers such as Kenya-based Safaricom offer payment services that were once a preserve of brick-and-mortar institutions.

To continue reading this article register now

Download CIO's Winter 2021 digital issue: Supercharging IT innovation