Fidelity Bank Blocks Transfers to OPay, Moniepoint, Other Neobanks Over Fraud and KYC Worries

Fidelity Bank, one of Nigeria’s leading commercial banks, has stopped its customers from sending money to neobanks such as Moniepoint, Kuda, OPay, and PalmPay.

The bank claims that the move is due to an app upgrade, but sources say it is because of rising cases of fraud and weak customer verification by the neobanks.

According to TechCabal, many customers noticed that the neobanks were missing from the list of approved financial institutions on the Fidelity Bank app about a week ago. Five sources confirmed that the transfer restrictions started at least two weeks ago and are still in place at the time of writing.

The neobanks affected by the ban have different reactions. OPay denies any impact, despite customer complaints. PalmPay says Fidelity Bank notified them of a system upgrade and promised to restore them soon. Moniepoint confirms the restriction but does not give any details.

Sources linked to Fidelity Bank say that the bank is losing money to fraudsters who exploit the lax KYC (know your customer) processes of the neobanks. Some banking industry experts agree that Nigerian banks and fintechs have been hit hard by cyber attacks and fraud since the beginning of the year. They say that the neobanks need to improve their due diligence and KYC standards to avoid being blocked by other banks.

A senior person at a Nigerian bank tells TechCabal that traditional banks used to ignore KYC for neobanks, but now they are more strict because of the fraud surge. They sometimes want to see or even conduct KYC for the neobank customers themselves.

Some neobanks use third-party verification companies to collect and verify customer information remotely using digital documents and biometric verification. This method is faster and more convenient for customers, but traditional banks doubt its reliability.

One expert says that both neobanks and traditional banks are guilty of poor KYC practices. They say that traditional banks may be strict at first, but they may not verify the documents properly, especially when they are changed.

Apart from the anti-fraud measures, there are also questions about whether a bank can legally block transfers to another bank without the consent of the regulator. The CBN Customer Due Diligence Regulations 2023 do not address this issue. The regulations only require banks to have a risk management framework to identify and mitigate the risks.

It is not clear if Fidelity Bank informed the CBN before it imposed the transfer restrictions. Sources say that the bank probably acted on its own. “They can silently do it. If your house is about to burn down, you have to save yourself,” an industry leader tells TechCabal. “Even if the regulators ask them

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