Must Read of the Week:
Recently the traditional sending of remittances has been under attack from FinTechs. Companies like TransferWise, Xoom, and WorldRemit have utilized technology, superior user experience, and lower prices to compete with more traditional players – banks and Western Union, for instance – over the $582 billion global market. However, such disruption has not gone unnoticed and some country’s regulators are wary of the new entrants. In a recent move, the Central Bank of Nigeria (CBN) – a country who received an estimated $21 billion of remittances in 2015 – issued a new directive that will require the vast majority of the country’s money transfer operators (MTO) to suspend operations.
The CBN has a reputation for being a ‘hands-on’ regulator, and their focus on the role of MTOs in the country is not new. Last year, per Quartz, CBN issued a directive that all MTOs must be:
- Operational in 20 countries;
- Have a net worth of $1 billion; and
- Have at least 10 years of working experience
The above are intended to be prohibitive requirements, especially for new FinTech companies who have been in business several years.
Per Quartz, the new regulation builds on those made in 2015 and “targets money transfer companies that work through local partners and do not have their own infrastructure to remit foreign currency to banks. Effectively it means all but a handful of MTOs that fulfill the central bank’s stiff requirements will have to close.”
In our work, we often see the struggle faced by regulators with the ‘inclusion vs. integrity’ debate. While the priority of central banks will always be to secure the safety of the payments ecosystem, they should not be overbearing and unduly shape the market and products offered (within reason, of course). While CBN may argue that more traditional players can best provide security, we believe this move to be shortsighted and incorrect. TransferWise, for instance, is an established company who is operating in 38 different currencies around the world – and several other companies share their global coverage. Unfortunately, in the case of Nigeria, ultimately the population and diaspora suffers the most – we hope that CBN reverses their decision shortly.
Read the article here: http://qz.com/750156/nigerias-central-bank-wants-to-keep-remittances-expensive/
Read the directive here: https://www.cbn.gov.ng/Out/2016/TED/TED.FEM.FPC.GEN.01.004.pdf