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Banks play a vital role in the financial system by providing essential financial services to individuals and companies. They provide a secure place to deposit money as a financial services provider and control the flow of money to businesses that require the funds to grow and expand their businesses.
Introduction
Banks play a vital role in the financial system by providing essential financial services to individuals and companies. They provide a secure place to deposit money as a financial services provider and control the flow of money to businesses that require the funds to grow and expand their businesses. The adoption of digital banking, along with the need for a stable and secure financial system, has necessitated the implementation of the Know Your Customer (KYC) process which is a mandatory procedure for verifying the identity and credentials of customers, for the primary purpose of preventing fraudulent activities and illicit practices that could undermine the stability of the financial system. However, with the introduction and evolution of digital banking, it is important to maintain a balance by effectively implementing KYC processes for customers and appropriately recognizing their privacy rights to prevent an avoidable conundrum. This article seeks to consider the convergence of data privacy and KYC measures in the Nigerian banking system by exploring the recent Nigerian court case of EKE v CENTRAL BANK OF NIGERIA[1], which ignited the debate about the intersection of privacy rights and KYC regulations in the financial services sector.
Banking, evolution of digital banking and data privacy
Basically, banking is the business activity of accepting deposits from the public, safeguarding those funds, and using them to provide loans, facilitate payments, and offer financial services.
According to the Banks and Other Financial Institutions Act (BOFIA) 2020, Banking is defined as “the business of receiving deposits on current account, savings deposit account or other similar account, paying or collecting cheques, drawn by or paid in by customers; provision of finance consultancy and advisory services relating to corporate and investment matters, making or managing investments on behalf of any person whether such businesses are conducted digitally, virtually or electronically only or such other business as the Governor may, by order publish in the gazette, designate as banking business.[2]
It is important to note that the provision of banking services is heavily regulated by the Central Bank of Nigeria (CBN). Consequently, only licensed entities can provide any form of banking services in Nigeria whether traditional or digital or both.
Digital Banking
Digital banking refers to the use of digital technologies especially the internet and mobile devices to deliver banking services and manage financial transactions without the need to visit a physical bank branch. Examples are Traditional Banks offering online/mobile banking or fully digital or Neobanks offering full digital services without a physical outlet/branch.[3]
Digital Banking evolution has come a long way since the days when transactions could only be conducted in the traditional physical centres. It transcends the banking system beyond the physical financial centres to a virtual online banking system that is internet enabled and offers it users a-round-the-clock access to financial services, therefore enhancing speed and reduced transaction cost thereby making banking faster, more convenient, and accessible, aligning with the shift toward a more connected and tech-driven financial world. In fact, globally, it is estimated that the integration of digital banking services results in a 20% reduction banking operational cost.[4]
As digital banking continues to expand, financial institutions must address complex security challenges while maintaining operational efficiency. Robust data privacy strategies, including encryption, authentication controls, and regulatory compliance, help mitigate risks and strengthen cybersecurity defence. Protecting banking data privacy is essential for preventing fraud, securing transactions, and ensuring long-term customer confidence.
[1] Unreported. FHC/L/CS/1281/2023 – Honourable Justice Nnamdi Dimgba of the Federal High Court, Lagos Division
[2] Section 2 of the Banking and other financial Institutions Act, 2020
[3] ‘Challenges of digital privacy in banking organizations’ by Okechukwu Innocent Ogudebe, Walden University.
[4] ibid
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Important Notice: The information contained in this Article is intended for general information purposes only and does not create a lawyer-client relationship. It is not intended as legal advice from Jackson, Etti, & Edu (JEE) or the individual author(s), nor intended as a substitute for legal advice on any specific subject matter. Detailed legal counsel should be sought prior to undertaking any legal matter. The information contained in this Article is current to the last update and may change. Last Update: October 1, 2024.
