In view of increasing consumers appetite for payment solutions and emerging disruptive technology in the financial services space, the Payments System Management Department of the Central Bank of Nigeria (CBN) has released a draft framework for regulatory sandbox operations in the country.
The Regulatory Sandbox 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.
The framework defines the establishment, rules and operations of a regulatory sandbox for the Nigerian payments system in order to promote effective competition, embrace new technology, encourage financial inclusion and improve customer experience, with a view to engendering public confidence in the financial system.
According to the reserve bank, the objectives of the regulatory sandbox operation in Nigeria are as follows: 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 and to ensure appropriate consumer protection safeguards in innovative products.
Other objectives stated by the apex bank include to clearly define the roles and responsibilities of stakeholders and the operations of the sandbox for the Nigerian payments system industry; to ensure adequate provisions in regulations to create an enabling environment for innovation without compromising on safety for consumers and the overall payments system and to provide an avenue for regulatory engagement with FinTech firms in the payment space, while contributing to economic growth.
The sandbox application process is open to both existing CBN licensees such as financial institutions with FinTech initiatives and other local companies, including financial sector companies, technology and telecom companies intending to test innovative payments product or service industry deemed acceptable by the CBN.
Others that can also apply include those proposing non-regulated technology whose proposed solution involves technologies which are currently not covered under existing CBN regulations.
A Letter of Approval (LoA) would be issued to the innovator which would allow sandbox participants to test their innovation upon entry into the sandbox