LEGAL FRAMEWORK FOR DIGITAL BANKING IN NIGERIA
Digital banks are institutions that accept deposits, are participants in deposit insurance programmes, and provide banking services mostly online rather than through physical locations
LEGAL FRAMEWORK FOR DIGITAL BANKING IN NIGERIA
There are increasingly businesses seeking to establish a digital bank as a solution to the challenge of the rising demand for quicker and more convenient financial services. Digital banks are institutions that accept deposits, are participants in deposit insurance programmes, and provide banking services mostly online rather than through physical locations. The country has recently seen the emergence of a new class of fintech companies known as digital banks; well-known examples include ALAT by Wema bank, Kuda bank, Sparkle, etc. These financial firms, usually referred to as challenger banks, are supported by technology and provide all or some banking services online.
WHAT ARE THE LEGAL AND REGULATORY STEPS TO TAKE IN SETTING UP A DIGITAL BANK
LICENSING
Promoters looking to launch a digital bank should first be familiar with the regulatory environment before moving forward with company formation. The Central Bank of Nigeria is the main regulatory body in charge of overseeing all financial institutions in Nigeria. As the CBN is yet to create a specific licensing regime for digital banks, companies intending to provide digital banking services must work with one of the available financial licenses that operate in the country.
INCORPORATION AND DOCUMENTATION
The next step is to register the firm with the Corporate Affairs Commission if the appropriate licence has been found (CAC). The above-mentioned CBN licencing capital need must be considered when calculating the company's share capital requirements.
Promoters must make sure they have the appropriate contract in place to safeguard their company and their stake in it, such as carefully negotiated conditions of investing in the digital bank, in addition to forming the company at the CAC.
PROTECTING THE INTELLECTUAL PROPERTY
The National Copyright Commission or the Trademarks, Patents and Designs Registry are acceptable registries where the intellectual property of the company, including its logo, software, and source codes, should be appropriately secured.
CORPORATE GOVERNANCE
Companies established to offer digital banking services should embrace sound corporate governance principles in their operations, such as making sure the board is appropriately constituted with at least one independent director and establishing the necessary board committees. Investors are drawn to businesses with sound corporate governance.
NB: This article is not a legal advice, and under no circumstance should you take it as such. All information provided are for general purpose only. For information, please contact chamanlawfirm@gmail.com
WRITTEN BY CHAMAN LAW FIRM TEAM
EMAIL: chamanlawfirm@gmail.com
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