Moniepoint, OPay, PalmPay responded to 2024 ban with better data collection and compliance

In 2024, Nigerian fintechs faced significant regulatory pressure, including fines and a six-week ban on onboarding new users due to compliance issues with anti-money laundering (AML) and fraud prevention standards. In response, leading fintechs revamped their operations, strengthening compliance measures and increasing data collection efforts to regain regulatory trust.

Their efforts coincided with the CBN retiring 18 directors in May 2024, including a director of other financial institutions, causing a shift in regulatory stance.

“Once the new guys came in, they didn’t have such strong feelings (for Nigeria’s fintech industry),” said a fintech executive who asked not to be named so they could speak freely.

The new directors have been more open to collaborating with the fintech sector than predecessors, allowing leading fintechs to improve their lobbying efforts, two fintech executives said.

The fintechs have made progress with some of the compliance issues the CBN flagged in 2024. They have significantly enhanced their data collection practices and send detailed reporting to the Nigerian Financial Intelligence Unit (NFIU) on politically exposed persons, suspicious transactions, fraud cases, and geo-tagged transaction data.

They have also broadened the definition of suspicious transactions. PalmPay, which has over 30 million customers, has introduced software to flag large and frequent transactions that appear suspicious. This allows its compliance team to review the transactions before filing a report with NFIU.

Moniepoint, a major Nigerian fintech, has also expanded its definition of suspicious activities as it now blocks accounts that log in from certain countries that are commonly linked to fraudulent activity.

“We do not want to be a conduit for fraud,” one fintech executive stated, echoing a shared sentiment in the industry.

Beyond tightening transaction monitoring, fintechs have restructured their teams to improve efficiency and accountability. Compliance teams are now integrated with customer onboarding and retention teams, allowing for better identification of potential threats.

In addition to internal changes, fintechs have employed ethical hackers—cybersecurity professionals paid to test their systems for vulnerabilities. These ethical hackers aim to identify security weaknesses before malicious actors can exploit them, giving fintechs an added layer of protection.

“These hackers help us stay one step ahead of criminals by exposing potential flaws in our systems,” a fintech executive explained.

Minor improvements to the startups’ apps have also been a central focus. PalmPay and OPay have introduced facial recognition for first-time users, large transactions, and transfers to new beneficiaries. These tools are designed to enhance security and prevent fraudulent activities from slipping through the cracks.

Both companies also launched a “night guard” feature for an extra layer of protection for transactions conducted after 6 p.m., a period traditionally more vulnerable to fraud.

However, some of the fintechs’ improvements have impacted user experience with several customers sharing complaints of having accounts blocked after performing large transactions, requiring an explanation of the transactions before regaining access. But executives argue that this has been necessary to prevent fraud.

Ultimately, the fintechs efforts have been met positively with regulators softening their hardline stance. Industry insiders have noted that regulatory agencies, including the CBN and NFIU, have become more receptive to fintechs’ security measures and reporting practices.

This will only continue as long as Nigerian fintechs improve their compliance efforts, and like banks, present a unified front to regulators, for easier and more transparent regulatory supervision.