Nigerian fintechs have made a remarkable turnaround in their regulatory fortunes, following a tumultuous 2024 marked by fines and a six-week ban on onboarding new users. The industry's efforts to strengthen compliance measures and increase data collection have paid off, with regulators softening their stance and acknowledging the progress made.

The shift in regulatory tone coincided with the Central Bank of Nigeria (CBN) retiring 18 directors in May 2024, including a director of other financial institutions. This change in leadership has led to a more collaborative approach, allowing fintechs to improve their lobbying efforts and work more closely with authorities.

Fintechs have made significant strides in addressing the compliance issues flagged by the CBN in 2024. They have enhanced their data collection practices, providing detailed reporting to the Nigerian Financial Intelligence Unit (NFIU) on politically exposed persons, suspicious transactions, fraud cases, and geo-tagged transaction data. For instance, PalmPay, which has over 30 million customers, has introduced software to flag large and frequent transactions that appear suspicious, allowing its compliance team to review and report them to NFIU.

Moniepoint, another major Nigerian fintech, has expanded its definition of suspicious activities, blocking accounts that log in from certain countries commonly linked to fraudulent activity. This proactive approach demonstrates the industry's commitment to preventing fraud and maintaining a secure environment for users.

Beyond transaction monitoring, fintechs have restructured their teams to improve efficiency and accountability. Compliance teams are now integrated with customer onboarding and retention teams, enabling better identification of potential threats. The industry has also employed ethical hackers, cybersecurity professionals who test their systems for vulnerabilities, helping fintechs stay one step ahead of criminals.

Minor improvements to the startups' apps have also been a central focus. PalmPay and OPay have introduced facial recognition for first-time users, large transactions, and transfers to new beneficiaries, enhancing security and preventing fraudulent activities. Both companies have also launched a "night guard" feature, providing an extra layer of protection for transactions conducted after 6 p.m., a period traditionally more vulnerable to fraud.

While these measures have impacted user experience, with some customers experiencing account blocks after performing large transactions, fintech executives argue that this is a necessary step to prevent fraud. The industry's efforts have been met positively by regulators, who have become more receptive to fintechs' security measures and reporting practices.

Industry insiders note that the key to continued progress lies in fintechs' ability to present a unified front to regulators, ensuring easier and more transparent regulatory supervision. As long as Nigerian fintechs maintain their commitment to compliance and collaboration, they are likely to continue regaining regulatory trust and driving growth in the industry.