How the Open Banking Registry Could Transform Banking Network Reliability in Nigeria
As the Central Bank of Nigeria (CBN) continues to make significant progress in the implementation of Open Banking Framework and the introduction of the Open Banking Registry (OBR), a critical question remains unanswered: “will the OBR push Nigerian banks to upgrade their often underperforming network infrastructure?”
The OBR will be designed to foster transparency, trust, and seamless collaboration between banks, fintechs, and other financial institutions, representing a pivotal step forward for the country’s financial ecosystem. Yet, the OBR’s success is largely dependent on stable and reliable network infrastructure which is almost non-existent in most of the major financial institutions in the country. Several issues such as frequent downtimes and inconsistent API performance, pose significant risks to the consumer authorization process for seamless data sharing and payment initiation required for open banking to thrive. Addressing these challenges is not just a necessity for compliance but a strategic opportunity to enhance the resilience and reliability of Nigeria’s banking infrastructure.
Understanding the Open Banking Registry
The Open Banking Registry (OBR) is a centralized repository that houses information on all participants in Nigeria’s open banking ecosystem, including banks, fintechs, and other financial institutions. It acts as a regulatory gateway, ensuring that only accredited entities can securely access and share data as part of the open banking framework in the country. This registry will promote trust and security while establishing minimum standards for operational efficiency and interoperability with the ecosystem.
For Nigerian banks, the OBR represents both an opportunity and a challenge. While it enables innovation and broader financial inclusion, it could also require banks to upgrade their infrastructure to meet the registry’s technical and operational demands.
Persistent Network Challenges in Nigerian Banking
One of the critical hurdles for Nigerian banks is the ongoing network instability that has plagued the sector for years. Not a day goes by without receiving a notification from one or more of my bank telling me about some network downtimes. All over social media, particularly X, Nigerians are also “calling out” these banks for one reason or another. Issues around network challenges can result in one or more of the following:
● Frequent Downtimes: Many banks experience frequent and repeated service outages, disrupting customer transactions and third-party integrations.
● Inconsistent API Performance: Open banking relies heavily on robust and reliable APIs for real-time data exchange, which could be undermined by poor network infrastructure.
● Limited Scalability: With the expected influx of fintech partnerships and increased transaction volumes, banks will be expected to scale their infrastructure to handle demand without compromising performance.
● Data Security Risks: Substandard infrastructure can expose banks to data breaches, undermining customer trust in the open banking framework.
Infrastructure as a Competitive Necessity
For open banking to deliver its full potential—fostering innovation, financial inclusion, and enhanced customer experiences—banks must ensure their systems can meet the requirements of the registry. This includes:
1. API Performance: One major challenge lies in the varied authentication processes employed by banks across Nigeria. While some banks use two-factor authentication (2FA), others rely on multi-factor authentication (MFA). This inconsistency in authentication experiences introduces significant friction for third-party providers (TPPs) and, by extension, the customers they serve.
That said, some banks are leading the way in delivering smoother authentication experiences. Wema Bank, GTBank, and Zenith Bank stand out for their relatively seamless processes. However, Access Bank’s MFA process, though secure, has proven to be cumbersome, often resulting in frustration for TPPs.
It’s worth emphasizing that API performance starts with authentication. If authentication is overly complex or unreliable, it sets a poor tone for subsequent integrations and user interactions. To unlock the full promise of open banking, banks must not only adopt robust security measures but also ensure these measures are efficient and user-friendly.
By standardizing and improving authentication processes, banks can create a more conducive environment for collaboration, innovation, and customer satisfaction—cornerstones of a successful open banking framework.
2. Data Security: Ensuring secure transmission of sensitive financial data requires advanced encryption and infrastructure upgrades to meet regulatory standards.
3. Scalability: The influx of third-party applications and increased API calls will require banks to adopt scalable cloud-based infrastructure.
Banks that fail to invest in these areas risk being left behind in an increasingly competitive landscape. The ability to provide uninterrupted, real-time services will become a differentiator for customer retention and partnership opportunities.
While the challenges are significant, the Open Banking Registry presents a transformative opportunity for Nigerian banks. The Open Banking Registry is a bold step toward a more integrated and inclusive financial ecosystem in Nigeria. However, for it to succeed, the persistent network issues facing Nigerian banks must be addressed. By encouraging higher service standards and fostering a culture of continuous improvement, the CBN can ensure that the OBR not only facilitates innovation but also strengthens the resilience of the country’s banking infrastructure.
For Nigerian banks, the message is clear: the time to invest in network reliability and scalability is now. Those that rise to the challenge will emerge as leaders in a rapidly evolving financial landscape.
