On July 5, 2022, the Central Bank of Nigeria ("CBN") issued an exposure draft of its Digital Financial Services Awareness Guidelines ("Draft Guidelines"). The Draft Guidelines were issued in cognizance of the increase in the provision and use of digital financial services in Nigeria, majorly impacted by the Covid- 19 virus. The Draft Guidelines provide a set of principles and requirements that digital financial service providers ("DFSPs") are required to comply with in the provision of digital financial services to customers.
Today's newsletter briefly highlights the scope of the Draft Guidelines and the principles laid down for DFSPs.
What are Digital Financial Services?
The Draft Guidelines defines digital financial services as services delivered to consumers through digital channels irrespective of whether or not they are offered by banks. Such services include electronic money services, mobile financial services, online financial services, branchless banking, i-teller services etc.
Which businesses would the Draft Guidelines apply to?
The Draft Guidelines apply to;
(i)Deposit Money Banks;
(ii) Merchant banks;
(iii) Payment service banks;
(iv) Other Financial Institutions; and
(v) Other payment service institutions licensed by the CBN.
What are the Principles laid down in the Draft Guidelines?
The Draft Guidelines require DFSPs to comply with the following principles:
1. Customer Awareness and Education: DFSPs should ensure easy access to information on their product offerings and provide necessary information to their customers to enable them to differentiate between digital financial services offerings and conventional banking products. The Draft Guidelines also require DFSPs to develop educational materials regarding their services for prospective and existing customers and circulate such materials through Short Message Services (SMS), Unstructured Supplementary Service Data (USSD) e.t.c. upon prior review by the CBN.
2. Disclosure, Transparency and User Privacy: This principle requires DFSPs to disclose the terms and conditions of their services (including all fees and applicable charges) to customers prior to subscription. They are also required to ensure data privacy in their processes and put measures in place to enable customers easily "opt-out" from sharing data with third parties.
3. Product Usability and Market Testing: DFSPs are to test the usability of their products and modify their products to reduce transaction errors. In addition, DFSPs are to provide consumers with reliable and easily accessible customer support channels.
4. Fraud Prevention and Risk Management: The Draft Guidelines require DFSPs to educate their clients on how they can protect their assets against potential fraud and share general fraud prevention tips to their customers in local languages.
5. Awareness and Access to Redress and Complaints Handling: DFSPs are required to include information on service levels and customer complaint channels on their subscription materials and conduct periodic training for staff responsible for handling complaints.
6. Monitoring and Evaluation: DFSPs are required to put strategies in place to assess their policies on consumer awareness. They are also required to submit bi-annual and monthly returns on their strategies and performance measures; and consumer awareness initiatives respectively to the CBN.
The Draft Guidelines complement the existing obligations of DFSPs which are provided for in other guidelines and regulations issued by the CBN and other regulatory agencies. It primarily seeks to ensure the commitment of DFSPs toward data privacy, financial literacy and consumer protection.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.