KYC KO; Round One

Uzoma Dozie
3 min readOct 31, 2023


Ahead of the weekend, we saw a big top six traditional bank pulling its full might against Nigeria’s ever-expanding community of neo-banks and PoS operators, reminding us all that just because digital banking and fintech may be growing in popularity and hype [especially in the VC space], the big boys are still the ones calling the shots, for now.

Fidelity Bank was reported to have restricted consumer fund transfers to the neobanks, raising concerns over alleged inept KYC procedures by the newer entrants, which in turn was enabling more fraudulent activity. The full article by Tech Cabal can be read here. Two days later, it was reported that Fidelity Bank had restored transfers to neobanks, but 48 hours+ of downtime for a neobank is enough to cause havoc and dent trust in the system.

Whilst I know that at Sparkle, as a digital bank, we embed strict KYC procedures at every step of our new customers’ journeys, and I am therefore confident that our traditional banking partners will not block us, the swiftness of Fidelity Bank’s decision to stop payments [and the ramifications] gave me cause for concern especially as it’s unclear as to whether the CBN had full visibility of the decision before it was made.

Firstly — what processes exist for a traditional bank to stop traditional banking partners from pulling out of services at such lightning speed? For example — who’s to say Sparkle wouldn’t be next? Secondly, more broadly, what is the longer-term effect on the reputation of digital finance platforms and financial services? Weakness in a system erodes trust. There has been a breakdown of trust between bank and neo-bank, which will trickle down to the end user [consumers]. And at Sparkle, we are in the business of building trust with our users. Without trust, in the end, everyone will suffer.

NIBSS (Nigeria Inter-Bank Settlement System) is supposed to be a centralised system to facilitate and maintain trust for electronic or paperless payments, funds transfer and settlement of transactions; on this occasion, it hasn’t worked. What other global standards are in place for KYC in Nigeria that we, as financial services providers, subscribe to that will force us all to uphold the highest compliance and identity standards? We need relevant certifications that enhance security and prevent fraud, ISO and PCDISS, to name a couple. This is something I’ll be discussing with my industry peers with a renewed sense of urgency over the coming weeks and months. Why? Because we [digital banks] need to look at KYC before it becomes the Wild West before the traditional banks smite us with ever deeper and harsher immediate blows that affect our customers and us. We don’t want pistols at dawn; we want safe and secure digital transactions, 24/7.

The journey to rebuilding trust cannot be laid solely at the doors of the neobanks; Nibss and traditional banks must all unite in this KYC trust-building exercise. Central players like NIBSS can play an even more significant role by introducing minimum standards and certifications that financial services organisations have to have if they want to use the Nigerian online and offline payment systems. These standards and governance will create a higher level of security, data protection and transparency that reduces the opportunity for distrust in the system.

Together, they must also dedicate resources to ensuring that the supply chain works for all: for the banks, for the digital financial service providers who are layering products on top of traditional products, for regulators who need to be constantly [re]assured of compliance and anti-fraud measures in place and, importantly, end users, whose trust is a prerequisite when it comes to rowing digital in Nigeria.