The Central Bank of Nigeria is working on a draft framework for regulation purposes. The proposed sandbox operations will control innovation in the fintech sector.
What is the regulatory sandbox?
The sandbox is a regulatory framework allowing Fintech startups and innovators to test products and innovations within a controlled environment. The live experiments occur under the regulator’s supervision.
CBN will mandate the sandbox to already licensed firms and other financial institutions, telecommunication and technology firms testing innovative payment products. Other technologies that are not mandated by the CBN regulations are also accepted.
Innovative in Nigeria’s fintech
The innovative boom in the fintech sector finally attracted the oversight of the Central Bank of Nigeria. This was partly due to the huge uptick in consumer adoption of financial services.
The sandbox will increase their competitiveness as they adopt new technologies that promote financial inclusion. CBN will test the products to ensure they are consumer-friendly.
Future of fintech in Nigeria
Before the new draft laws, fintech startups had a carte blanche to launch new pilots without necessarily involving the Central Bank of Nigeria. The introduction of the new sandbox regulations helps innovators get a letter of approval to test their innovations.
The regulations aim to reduce the time to market for innovative products and services. However, skeptics argue that the CBN will hinder innovative ideas that might be too disruptive since they’re now in control.
Fintech innovations must now get a letter of approval before testing out their innovations in the sandbox. This will create an enabling environment for innovative entry without compromising clients’ safety and the overall reputation of the sector.