Misconceptions about the BVN and its impact on the Nigerian FinTech Industry
Compared to most developed countries, Nigeria did not adopt electronic banking early. The electronic banking system in Nigeria was introduced in the early 2000s. Since the introduction of electronic banking online fraud has skyrocketed.
In other to mitigate these crimes, the apex bank, the Central Bank of Nigeria (CBN) introduced the Bank Verification Number (BVN) as a biometric identification system in February 2014.
The aim of the BVN is to curb illegal banking transactions in Nigeria. It is a security measure in line with the Central Bank of Nigeria Act 1958 to mitigate fraud in the banking sector.
The system works by live capturing the fingerprints and a passport photograph and contact information of the customer.
The technology was welcomed as it is a great initiative that would reduce illegal banking transactions and improve national financial intelligence and recognizance. The funds of account holders would be prioritized so that their increased confidence in the banking system would improve the financial reputation of the commercial banks. This means that when a fraudulent transaction is done using a Nigerian bank account, it makes it easy to profile the culprit within the shortest possible time because all active bank accounts are mapped to the BVNs of the account holders.
However, the commercial banks have not provided a detailed explanation of the strength of the BVN to the public. All they do is share newsletters at intervals advising customers never to share their BVN with anyone and also desist from inputting it into any third-party website or mobile application. Meanwhile, the BVN is loosely disclosed at these commercial banks. Almost every bank form requires a BVN, even though authorized bank staff can access a customer’s account without the customer providing it. This raises the question; why request the BVN all the time, when it can be easily retrieved by the banks’ authorized staff?
The BVN is a means of identifying a Nigerian (or a foreigner with a residence permit) that operates a bank account with any Nigerian bank. The BVN is mapped to the bank account at the point of opening or linked to it if it was opened before the introduction of the BVN system.
Due to the way the commercial banks portray the BVN to their customers, these popular misconceptions have been made about the BVN;
The BVN is an authorization tool that can be used to gain access and carry out transactions on a customer’s account
This is indeed laughable because the BVN is not different from a Driver’s License Number (DLN), International Passport Number (IPN), National Identification Number (NIN) and a Tax Identification Number (TIN). The BVN is used in collaboration with either the DLN, IPN, TIN or the NIN to successfully open and operate a bank account in Nigeria.
People with the clearance to authorize transactions on a customer’s account with such ease are staff of the bank who do not require the customer’s BVN. Hackers cannot use the BVN to hack a customer’s bank account either.
That is why fraudsters use phishing and other data spoofing techniques to hijack, sessions, card details, SMS OTP, security questions, passwords and pins from gullible customers.
Since the BVN is linked to an individual’s bank account(s), a bank can use a customer’s BVN to access details of the customer’s bank accounts with other banks
First of all, the banks a customer has accounts with have the customer’s BVN and bank account details. A simple name search on their platform will return this information.
With the BVN a bank cannot access details of their customer’s bank accounts with other banks. Even if the bank has the BVN and the account numbers of the customer with other banks.
If an individual shares their BVN with a Federal Government Agency, the agency can use it to freeze their bank accounts
This is a ridiculous misconception because the BVN is issued by the federal government (CBN) through commercial banks. The platform used to generate the BVN for a customer is controlled by the federal government through the apex bank. Sometimes, some government agencies may need individuals to provide their BVN and other information to verify their identity. If the government wants to freeze an individual’s account, they do not need the person to provide their bank accounts and BVN. A simple name search on the database of the apex bank will return details of all the individual’s bank accounts in Nigeria, where authorized bank staff can be instructed to freeze, unfreeze or even withdraw any amount of money from the individual’s bank account if need be. There are legal procedures for doing this.
The impact of this Misinformation and Misconception on the Fintech Industry
The FinTech (Financial Technology) Industry in Nigeria is rapidly growing. There are numerous online payment processors, online banks, asset management companies, instant loan services, AgriTech (Agricultural Technology) and crowdfunding platforms that leverage FinTech.
These companies at one stage may require users to supply their BVN and other personal information to instantly verify their identity which will enable them to access additional services on these platforms. This is possible because of the BVN verification API (Application Programming Interface) that has been provided for public use through some CBN licensed FinTech companies.
Due to the misinformation and misconceptions about the power of the BVN, it will take a great deal of intellectual overhauling to convince Nigerians to supply their BVN on a FinTech based website or mobile application and other government websites without fear.
This has negatively affected the acceptance of FinTech companies in Nigeria.
Most ill-informed Nigerians on the basis of fraud will immediately abandon a FinTech website or mobile application and even a Government operated website as soon as they are asked to supply their BVN.
It is no news that FinTech is disrupting traditional banking all over the globe.
The commercial banks are not making enough attempts to create awareness as regards the role of the BVN on other FinTech platforms and the fact that the BVN is not a transaction authorization or access tool that should be of concern to bank account holders.
The solution to this problem is to encourage the apex bank and the commercial banks to work with legitimate FinTech companies to enlighten Nigerians about staying safe online and the power of the different components (account number, BVN, TIN, Debit/Credit card number and pin, etc.) of a customer’s bank account.
A repository of all registered FinTech companies should also be created to give customers first-hand knowledge on how to use their personal information online.
The agencies responsible for issuing the DLN, TIN and the NIN should also collaborate with program developers to develop identity verification APIs as well. This will give users of FinTech applications and other web products multiple identity verification preferences.
With this collaborative effort, Nigerians will be better informed on how to leverage the immense benefits of FinTech.
Finally, it is strongly advised to keep all your personal information private. Here is a great article from Seamfix on how to achieve that.
However, it is very important to know the individual and collaborative strengths of the various components of your bank account and know what is shareable or not.
