Ego vs synergy: the problems and potential for digital identity and open banking in Africa
“Can we all overcome our egos to come together behind a big bowl of pepper soup and agree that we will speak the same language?” asks Adedeji Olowe, founder of lending-as-a-service platform Lendsqr and co-founder of Open Banking Nigeria. “The day we are able to overcome that selfish interest – that’s the day we all win.”
Opinions varied widely as egos as a barrier to interoperability, the need for standardization for digital identity across Africa and the role of the private sector in digital identity were discussed by a panel of identity and open banking specialists based in Nigeria for the webinar Digital Identity Matters 4.0 – Why digital identity is crucial to open finance in Africa.
Olowe was speaking alongside CEO and founder of KYC firm VerifyMe Nigeria, Esigie Aguele and Ope Adeoye, founder and CEO of financial services facilitator OnePipe, in the webinar moderated by Tosin Olaseinde, founder of The Money Africa, and hosted by TechCabal and VerifyMe.
“The tech guys don’t work together… the synergy is lost, the synergy that causes explosive growth,” said Olowe. He believes that interoperability is not just about technology, but common sense and agreeing to speaking the same language.
“That same language is open banking, open finance standards… the standardization of identity is as important as identity itself” which is why open banking and finance are critical to digital identity and why he gives Africa minus ten points for the standardization of identity so far.
Coming explosion for digital services
VerifyMe’s Esigie Aguele believes Nigeria is going to experience an explosion in open banking and ultimately finance and the KYC to power it as digital identity becomes more widespread in the country. Nigeria has reached a figurative one percent of its potential penetration for digital services he believes.
The growth will be powered by functional digital identity according to Aguele, but, like Olowe believes that success for digital identity lies not merely in the technical aspects but requires “the realization and the political appetite and you need to understand the reasons you’re doing it – so you can have an open economy and security”.
VerifyMe is “seeing 30x pretty much from year to year” according to the CEO and identity could become increasingly lucrative. “Identity is what powers the payment attribute layer,” he said, enabling a data service layer. Identity will provide more customer insights in a federated environment – and these consumer insights power open finance: “The stack is from identity to open banking to open finance”.
Owale did not entirely agree about the centrality of digital identity for open banking. “The open banking that is coming now doesn’t have a standard for digital identity because today if you look at Nigeria, digital identity is fragmented. Open banking is not about identity, but you need identity. What it comes down to is we are expecting that banks will use CDM-driven identity, based on BVN [Bank Verification Number].
“But BVN is a private identity scheme – it doesn’t address everything we’re talking about. The burden is still on the identity providers in Lagos, in Abuja, wherever in Africa, to come together to say ‘can we define how we want to know this is Tosin?’”
Public and private sectors complement rather than compete
“When it comes to regulation and timing, it’s almost like Rapture – we know it’s coming, but we don’t know when,” says Olowe. He believes that the way for open banking or standardized digital identity to succeed is via initial regulation, then standards emerging and then further regulation.
Ope Adeoye believes signup schemes for ventures such as BVN can be more effective when left to the private sector: “Propositions are better led by the private sector, because propositions that are sustainable need to have some monetary gain or value”.
Policymakers need to create frameworks that allow for private sector involvement and allow it to be taken to the grass roots, says Adeoye.
Olowe believes the private sector is more like the guys on the street and “can evolve on a faster scale than the government”. He clearly has faith in his private-sector co-panelists: “Take NIN [National Identification Number] or BVN, for example, let’s say it was Ope and Esigie who actually built this, they’d probably have the same bogged-down issues in the beginning… but they’d fix these problems and it would now be working.”
Olowe’s confidence in the public sector adapting to change is low: “I can tell you that BVN has not evolved in the eight years it has come out. NIN is not going to evolve for the next 20 years”.
Yet even VerifyMe’s Esigie Aguele believes the while the private sector has to lead in the connecting businesses with government-held data for authentication and verification, it ultimately has limits. “One of the problems with privatized identity is national security,” says Aguele, very much in line with the government line on identity and linking NINs to SIMs.
In the meantime, the fragmented nature of Nigeria and Africa’s identity platforms, approaches and standards are holding back open banking, open finance and other sectors, and the technology is not to blame.
“These are the questions identity providers should ask and unless they can leave their egos and big man-ism on one side and come to the table and agree, it’s not going to happen,” says Olowe.
There is the need to wait for people to move from talking to acting, he says, but at the moment “people are deliberately not working with everybody”.