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CBN unveils draft framework for regulatory sandbox operations

CAVEAT

Application process will be open to existing CBN licensed financial institutions with fintech initiatives, other local

 

 

The Central Bank of Nigeria (CBN) at the weekend released the draft framework for regulatory sandbox operations in the country.

 

 

The CBN defines a sandbox as  “a closed testing environment designed for experimenting safely with web or software projects.”

 

In a circular to deposit money banks (DMBs), mobile money operators and payment service providers posted on its website, the apex bank said the draft framework gives details on the requirements “for the conduct of live tests on innovative products, services and other solutions in a controlled environment.”

 

 

Specifically, the CBN said that 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.”

 

 

On the eligibility criteria for Sandbox applicants, the CBN proposed, among others, that  “the product, service or solution is innovative with clear potential to improve accessibility, customer choices, efficiency, security and quality in the provision of financial services; or enhance the efficiency and effectiveness of Nigerian financial institutions management of risks; or address gaps in or open up new opportunities for financial benefits or investments in the Nigerian economy.”

 

 

In addition, the apex bank proposed that “applicants will provide the proposed project within a limited transaction (value and volume) for better risk management and mitigation. The limits must not be exceeded during the testing period.”

 

 

 

Also, on participants in the Sandbox operations, the regulator said that the application process would be open to both existing CBN licensees (financial institutions with fintech initiatives) and other local companies.

 

 

“The latter may include financial sector companies as well as technology and telecom companies intending to test an innovative payments product or service industry deemed acceptable by the CBN,” it added.

 

 

According to the banking watchdog, other groups that can also apply include “those proposing non-regulated technology i.e. Innovators whose proposed solution involves technologies which are currently not covered under existing CBN regulations. “

 

 

It stated that a letter of approval would be issued to the Innovator which would allow Sandbox participants to test their innovation upon entry into the sandbox.

 

 

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