I’ve had this conversation too many times in private rooms with bankers I respect, people who have built real institutions and seen multiple cycles of this industry. So let me say it plainly: the fear is real, and it is not irrational.
A lot of the senior people in Nigerian banking today have been here long enough to watch the entire fintech story play out from the front row. Some of them started their careers around the same time I did. They remember when companies like Paystack*, Moniepoint, and Flutterwave were early-stage experiments run by small, hungry humans still figuring things out. At the time, these companies looked like side projects that banks could afford to ignore or even casually support.
Then things changed.
Those same “small boys” now sit on valuations and transaction volumes that rival, and in some cases quietly threaten, the dominance of traditional banks. That shift did not happen gradually enough for comfort. It happened fast enough to make anyone who has spent decades building a bank pause and rethink their life choices.
So when you ask why banks are nervous about open banking, you have to start from that lived experience. They have seen what happens when you underestimate speed.
“We’ve seen this movie before, and we didn’t like the ending”
There is also some institutional memory at play here that people don’t talk about enough.
The Nigerian banking industry has already fought one major defensive battle in the past. When mobile money was expanding across Africa, telcos were the dominant players in many markets. In Nigeria, banks pushed back aggressively. Leaders like Segun Agbaje and others were part of that resistance, and it worked. Telcos were kept out of fully owning mobile money in the way they did elsewhere.
That decision bought banks time. It allowed them to grow digital capabilities on their own terms and maintain control over customer relationships.
Now, from their perspective, open banking feels like opening the gates they spent years protecting.
So the hesitation is not just about technology or regulation, but about pattern recognition. They have seen what happens when new players get too much room to operate, and they are not eager to repeat that experience under a different label.
Open banking removes friction, and that is exactly the problem
Let’s strip this down to the core issue in a more honest way. Open banking standardizes access across board, and once that happens, a lot of the protective layers banks have relied on for years start to thin out. Data becomes easier to share in structured formats, payment initiation becomes more accessible, and integrations no longer require the same level of back-and-forth or commercial gatekeeping that used to slow things down. Third parties can plug into banking infrastructure with far less resistance, and they can start building customer-facing products without needing to negotiate every step of the journey.
On paper, this reads like progress, and to be fair, a lot of it is. The part that makes banks uneasy sits in what follows after that access is opened up. When friction reduces across the system, the advantage starts to shift away from who owns the infrastructure and toward who controls the customer experience.
Once you get to that point, competition takes on a different shape. Speed of execution, product intuition, and the ability to iterate without heavy internal processes begin to matter more than balance sheet size or legacy distribution. Fintech companies have spent years optimizing for exactly that environment, while banks have been structured around control, risk management, and layered approvals. That difference in operating model becomes much more visible when friction is no longer acting as a buffer.
This is where the discomfort really comes from. It is not just about opening APIs or complying with a standard, but about what happens after everything is opened up, when the barriers that once slowed everyone down are no longer there to protect incumbents from faster, more adaptive players.
The speed gap is not theoretical
If open banking goes live today in a fully functional way, there is very little stopping a player like OPay or Moniepoint from aggregating multiple bank accounts into a single interface. A customer logs into one app and sees balances across different banks in real time, with transaction histories and controls sitting in one place instead of being scattered across different banking apps.
That alone starts to change behaviour in meaningful ways, because convenience tends to win over habit when given enough time.
Now take it one step further. The same app could introduce a simple toggle that automatically sweeps funds from a traditional bank account into a primary account the moment money lands, based purely on user preference and ease of use rather than any issue with the bank itself. Over time, small features like that begin to influence where customers choose to keep their money and how they interact with it daily.
This is not a far-fetched scenario. It lines up directly with how product teams in fast-moving fintech companies think and build, especially when they are given standardized access to financial infrastructure.
The uncomfortable part for banks sits in how differently these products get built. By the time a fintech product manager has designed, tested, and shipped something like this, the equivalent idea inside a bank may still be working its way through internal reviews, risk assessments, and multiple layers of approval. That difference in pace comes from how these institutions are structured and how decisions are made within them.
Fraud is no longer someone else’s problem
There is another dimension that makes this even more sensitive, and that is fraud.
Historically, when fraud happened in many fintech-driven transactions, the burden often sat with the fintech or even the customer, depending on how the flow was structured and where the failure occurred. That reality quietly influenced how aggressively some of these systems were designed, because the party taking the risk was not always the one enabling the access.
That posture is changing, and it is changing in a way banks cannot ignore.
The Central Bank of Nigeria has made its position clearer over time, even if it has not always been spelled out in one single document. The expectation now leans toward banks carrying more responsibility when things go wrong, especially as they remain the licensed custodians of customer funds. The regulatory “body language,” as people like to call it, has shifted in a direction that places more accountability on the institutions at the core of the system.
So when banks look at open banking, the question they are asking is very practical and grounded in experience. If access is widened and multiple parties can initiate transactions or pull data, what happens when something breaks along that chain, and more importantly, who ultimately absorbs the loss and manages the fallout?
That question becomes harder to answer in an environment where fraud tactics are constantly evolving, and where increased connectivity can introduce new attack surfaces that did not previously exist at scale.
The regulator is stealthily solving a different layer of the problem
Interestingly, while all of this is happening, there are parallel regulatory efforts that many people are not paying enough attention to, even though they will have just as much impact on how the system evolves.
There is already movement toward deeper integration of AML and KYC systems across institutions, and the direction is becoming harder to ignore. Within a defined timeframe, banks will be expected to make decisions using more than just transaction patterns, with a growing emphasis on richer identity data and more contextual risk signals that travel with each transaction.
This begins to change how risk is assessed in a practical way.
Instead of focusing primarily on how frequently money moves or how large the amounts are, institutions will increasingly pay attention to who is behind those transactions, whether they appear on any sanction lists, and whether their behaviour aligns with what is known about their income and profile. Over time, this kind of intelligence allows for more informed decisions, especially in an environment where transactions are moving faster and across more connected systems.
So while open banking raises valid concerns about access, speed, and control, the regulatory side is quietly building a more data-informed risk framework in the background, one that is meant to keep up with that increased connectivity.
Both developments are unfolding at the same time, and banks are left with the task of reconciling wider access with tighter expectations around risk and accountability.
So should banks resist, or should they adapt?
This is where I tend to disagree with the idea that fear should drive strategy. I understand why banks are cautious. In fact, I think the fear is justified. If I were sitting in their position, I would not dismiss these risks either.
What I would not do is assume that slowing down open banking will stop the underlying shift. Because the truth is, the ecosystem is already moving in that direction, with or without formal standardization.
Larger fintechs are growing. Their capabilities are expanding. The technical barriers to integration are getting lower over time. If the official version of open banking takes too long, the market will find unofficial ways to approximate it.
At that point, banks lose even more control over how the system evolves. What makes this situation more interesting is that banks are not as helpless as the narrative sometimes suggests.
We have already seen examples of banks building their own platforms and ecosystems. Access Bank has Hydrogen. GTBank has Habari. Stanbic has Zest. These are not small experiments but deliberate attempts to extend beyond traditional banking interfaces.
At the same time, transaction flows are already shifting. Not everything is going through the traditional NIBSS rails anymore. Banks and fintechs alike are building alternative pathways that give them more control over how money moves.
Then you have virtual accounts, which have quietly become one of the most important tools in modern lending and collections. Banks like Providus, Sterling, and Wema have played significant roles in shaping that infrastructure. A large portion of loan repayments today depends on these systems.
So it is not accurate to say banks cannot adapt. They clearly can. Because one way or another, this evolution will happen. The only real question is whether banks shape it while they still can, or spend the next decade reacting to decisions made somewhere else.
* I am currently the board chair at Paystack
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