Fidelity Bank has implemented restrictions on customer fund transfers to neobanks, including Moniepoint, Kuda, OPay, and PalmPay. Bank customers have reported that they have been unable to conduct transactions to these neobanks via the Fidelity Bank app for over two weeks. This move has raised questions among users, with concerns about the reasons behind the restrictions.
According to sources, these online banks are facing limitations due to verification issues. However, Fidelity Bank stated that the restrictions are a result of an app update they are currently carrying out.
Sofia Zab, the Chief Marketing Officer of PalmPay, confirmed that Fidelity Bank sent a notice to the neobanks, indicating that the restrictions would only be temporary and in place until the app upgrade is completed.
The situation has raised speculation about potential reasons behind the restrictions. According to a source cited by Tech Cabal, Fidelity Bank took this action in response to increased fraud losses linked to a lack of strict customer Know Your Customer (KYC) and due diligence procedures.
Fintech companies in Nigeria are known for their simplified account-opening processes, making it easy for individuals of varying comfort levels to open accounts. While this approach has contributed to increased financial inclusion in the country, there have been claims that it has also made it easier for fraudsters to exploit these channels, resulting in a surge in fraud cases.
Since the start of the year, there have been numerous reported cases of fraud and cyberattacks, leading to substantial losses for fintech companies. BusinessDay recently reported how fintechs became a tool in a ₦14 billion fraud in Nigeria, with experts suggesting that a significant number of fintech-related fraud cases go unreported.
Fintechs have been addressing these challenges, with some reporting cases of fraud and difficulties in accessing funds. Opay, for instance, responded to allegations on social media about unauthorized withdrawals from customer accounts, while Patricia appointed a trust company to address its ₦2 billion debt to customers.
According to a report by the Financial Institutions Training Centre (FITC), Nigerian banks lost a staggering ₦9.5 billion to electronic fraud from January to August 2023. The report disclosed that during this period, there were a total of 12,552 cases of fraud recorded, indicating the pressing need for stricter security measures within the industry.
This move by Fidelity Bank to temporarily restrict transactions to neobanks highlights the broader challenge facing the financial industry in Nigeria concerning security and fraud prevention. As fintechs and traditional banks work together to enhance customer verification and due diligence processes, it is expected that the industry will continue to adapt to evolving threats in the digital age.