Financial technology (Fintech) is simply defined as the creative and innovative technology of providing financial services through electronic means by way of mobile banking, smart phones, investment services, digital transaction, crypto currency, virtual money and others against the regular and traditional banking institutions method.

The primary purpose of Fintech is to promote financial inclusion, access and enhancement of traditional financial institutions and communication services.

Also, the financial services of fintech mostly include Payment Solution Service Providers, Payment Gateways Providers, Bill Payments Platforms and E-wallet, Mobile Money Operators, Software Application Providers, Payment Infrastructure Service Providers,

Payment Service Providers and several other financial technology services platforms not mentioned here.

In the words of one of the greatest minds in law Glanville Williams in his book (Learning the Law) he posited that “Law is the cement of the society and an essential medium for change”. The new disruptive financial technology has changed the traditional banking and financial institution method forever and created a new set of risks, cyber security, cyber-crimes and legal challenges for the said financial technology in Nigeria and worldwide today.

Therefore, for a country like Nigeria, a comprehensive legal frame work and regulations setting out the rules in respect of formation and operation is very important.  There is also the legal lacuna as regard detailed laws, legal guide, defined right of the consumers, general public and service providers. The country will not be able to derive the best benefits from the ever growing fintech technology and this may result in unpalatable defects of the business in the future.

Consequently, urgent comprehensive legal structure needs to be created by way of legislative intervention through the enacting law by the National Assembly with consultation with all the experts and contribution from all the stakeholders in financial Technology Industry in Nigeria.

There is no law that clearly defines a detailed robust legal frame work for the sector.

The current laws on fintech are:

• Company and Allied Matter Act LFN 2004
• Bank and other financial Institutions Act 2004
• Central Bank of Nigeria Act
• Circular and guidelines issued by the CBN
• Cyber Crimes Act 2015
• Foreign Exchange (Monitoring & Miscellaneous Provision Act)
• Investment and Securities Act
• Securities & Exchange Commission Rules 2013
• Nigeria Communication Commission Act

Regulatory Agencies

1. Central Bank of Nigeria
2. Nigeria Communication Commission
3. Corporate Affairs Commission
4. Nigeria Securities & Exchange Commission
5. National Office of Technology and Acquisition promotion (NOTAP)

It is worthy to note that due to lack of legal frame work stipulating the rules and roles of the above government agencies, more often than not, it is a fact that inadequate deep understanding of the financial technology industry due to absence of laws clearly defining the roles of the regulators, service providers and general public are often overlapped and conflicting.

Since financial technology business is global and involves international financial clearing houses; cyber security laws against cyber-crimes are always a pre-condition before a country can participate in the financial technology business. It is compulsory for a government to enact sound laws to protect investment and Data against cyber- crimes.

The CBN current guidelines for operations of international money transfer services in Nigeria circular of 2014 is not sufficient. Also, the 2015 regulation of CBN requesting foreign international money transfer operators to secure license and show evidence of license in their home Country before they can operate in Nigeria market is equally not adequate without a new law.

It is worthy of note that the Nigeria Communication Commission also regulate mobile payment providers in which they must obtain a renewable NCC license tenure every 5 years.

Fintech entrepreneurs must also comply with requirements of Corporate Affairs Commission, which stipulates rules and minimum of 5billion share capital fully subscribed by the shareholders which must be incorporated by a business attorneys or commercial lawyers in Nigeria.

The CBN also requires a minimum take off fund of 14million Dollars shareholders fund, this huge share capital fund requirement is a major hindrance to growth in the sector because most start-ups in Fintech are often young, creative and innovative minds with no access to huge capital to fulfil this condition.

Recently, on the 9th of December 2020, the Central Bank of Nigeria in a press release published on its website updated rules for fintech and finance technology companies in Nigeria. The Central Bank of Nigeria according to the new guidelines, Payment Systems are now to operate within 4 broad categories.

1. A) Switching and Processing
2. B) Mobile Money Operations (MMOs)
3. C) Payment Solution Services (PSSs)
4. d) Regulatory Sandbox

The C.B.N also clarified that (only MMOs are permitted to hold customer funds. Companies with licenses within any of the other categories are not permitted to hold customer funds) meaning operations who offer Payment Solutions Services cannot for any reason hold customer funds or deposits.

Furthermore, Nigerian Securities & Exchange Commission approval for fintech companies in respect of securities and investments prohibits crowdfunding, virtual money, crypto currency are all prohibited. Although an individual can still deal in these investments if traditional banking institutions and financial investment Agencies are not involved,

It is also important to note that foreign fintech investors must register with National office for Technology Acquisition and Promotion in respect of Technology Transfer Agreements between the Fintech company in Nigeria and any foreign investor.

Conclusion

The bedrock of success of the fintech companies will depend on the new legal frame work through enacting 21^st century laws by the National Assembly covering the subject and also combining the law with strong cyber security and crime laws. The said law shall protect legal rights of the general public, corporate body, regulatory bodies in area of Data protection law, privacy and data usage law, personal and corporate right, including clear defined roles for regulatory Agencies.

We all agree that the greatest challenge faced by digital and technology world is Data Protection, and lack of clear Laws on Cyber Security Crimes and related offences.

We believe enacting good laws on this subject through wide consultation with information technology experts, financial experts, best lawyers and law firm in Nigeria in area of financial technology and other stakeholders in the industry to completely overhaul the existing inadequate Laws on Fintech, and equally design or draft an urgent law by enacting innovative financial Technology Law for Nigeria.

Since there is no limit to the human minds; enacting this new legal structure will enhance trust and growth in the financial technology business, combined with limitless opportunities for creative minds and young entrepreneur start-ups in Nigeria and interested foreign investor.

From establishment to commencement of business in Nigeria our knowledgeable corporate lawyers section can help and offer best fintech solicitors in Lagos, Nigeria & extensive experience on financial technology law services in Nigeria.