*The Central Bank of Nigeria has issued updated regulatory frameworks for financial technology (Fintech) sandbox operations and for entities operating Quick Response (QR) code payments in line with consumer desire for payment solutions and emerging disruptive technology in the financial services space in the country

Alexander Davis | ConsumerConnect

In a move to further promote innovation in Nigeria’s financial sector and provide security for consumers, the Central Bank of Nigeria (CBN) has issued updated regulatory frameworks for financial technology (Fintech) sandbox operations and for entities operating Quick Response (QR) code payments in the country.

In the two guidelines released Wednesday, January 13, 2021, the CBN stated that both frameworks were issued to stimulate innovation in the financial sector of the economy, and provide security for consumers.

According to the Bankers’ Bank, the increasing consumer appetite for payment solutions and emerging disruptive technology in the financial services space, has deemed it pertinent to ensure new and more flexible ways of engaging with the industry.

The CBN noted that one of the options being the use of a Regulatory Sandbox, which is a formal process for firms to conduct live tests of new, innovative products, services, delivery channels, or business models in a controlled environment, with regulatory oversight, subject to appropriate conditions and safeguards.

It stated this would enable the Bank to keep abreast of innovations while promoting a safe, reliable and efficient Payments System to foster innovations without compromising on the delivery of its mandate.

The Bank also said the framework defines “the establishment, rules and operations of a

Regulatory Sandbox for the Nigerian Payments System to promote effective competition, embrace new technology, encourage Financial Inclusion and improve customer experience, with a view to engendering public confidence in the country’s financial system.

Some of the objectives of the reviewed Regulatory Sandbox Operations in Nigeria are to increase the potential for innovative business models that advance financial inclusion; to reduce time-to-market for innovative products, services, and business models; to increase competition, widen consumers’ choice and lower costs.

According to the frameworks, others are to ensure appropriate consumer protection safeguards in innovative products; and to clearly define the roles and responsibilities of stakeholders and the operations of the Sandbox for the Nigerian Payments System industry.

Ensuring adequate provisions in regulations to create an enabling environment for innovation without compromising on safety for consumers and the overall payments system; and providing an avenue for regulatory engagement with Fintech firms in the payment space, while contributing to economic growth.

While Nigeria Fintech regulations are still developing, there is a high entry barrier for new entrants, and sandboxes could present them with a safe testing environment and ease regulatory onboarding.

It is recalled that in June 2020, the apex released a draft framework for comments from banks, mobile money operators and payment services providers.

The released framework retains most of the provisions in the original draft.

Likewise, in furtherance of the CBN mandates to ensure the safety and stability of the Nigerian financial system, and advance the use and adoption of electronic payments and foster innovation in the payments system, the Bank has issued the Framework for Quick Response (QR) Code Payments in the country.

Quick Response (QR) Codes are a kind of matrix barcode representing information presented as square grids, made up of black squares against a contrasting background that can be scanned by imaging device, processed and transmitted by appropriate technology.

These codes can be used to present, capture, and transmit payments information across payments infrastructure, it stated.

The technology further enables the mobile channel to facilitate payments and presents another veritable avenue for promoting electronic payments for micro and small enterprises.

Quick Response Code payments are increasingly becoming a popular means of payments in the country, and some industry players regard it as a perfect way to boost financial inclusion in the payments ecosystem.

QR codes are capable of storing lots of data. But no matter how much they contain, when scanned, the QR code should allow the user to access information instantly. It can be used for payments, sharing contacts and WiFi passwords and lots more.

According to the CBN, participants in QR code payments will include merchants, customers, issuers (banks, MMOs and other financial institutions), acquirers (banks, MMOs and other financial institutions), and Payments Service Providers (PSPs).

It also contains other provisions for issuers, customers, and other stakeholders.