KPMG Urges Nigerian Banks to Prepare for Open Banking Revolution

KPMG Nigeria has called on financial institutions across the country to accelerate their readiness for open banking, warning that the shift towards data-driven financial services is no longer optional but an imminent and transformative development. In a statement released on Monday, the global consulting firm emphasized that the successful implementation of open banking will redefine the competitive landscape of the banking industry and reshape how financial services are delivered in Nigeria.

Open banking, which enables customers to securely share their financial data with third-party providers via Application Programming Interfaces (APIs), is being embraced globally to foster innovation, improve customer experience, and promote financial inclusion. Nigeria took a major step in this direction when the Central Bank of Nigeria (CBN) released operational guidelines for open banking in 2023, signaling the official commencement of the framework’s rollout.

KPMG noted that while some banks have started adapting their infrastructure and policies to meet regulatory requirements, many others are yet to make significant progress, despite the ticking clock. The firm’s latest financial services outlook stressed that open banking will not only unlock new revenue models for banks but also expose them to heightened competition from fintechs and non-traditional players.

“The open banking ecosystem has the potential to reshape Nigeria’s financial services sector much like mobile money transformed East Africa,” said Olumide Olayinka, Partner and Head of Financial Services at KPMG Nigeria. “Banks that see this as a threat will be left behind. Those that embrace it as an opportunity to create better value for their customers will thrive.”

According to KPMG, Nigerian banks must take proactive steps such as investing in modern API infrastructure, rethinking their digital strategies, and developing partnerships with fintechs and other third-party providers to remain competitive. The advisory firm warned that a mere compliance approach would not suffice in a fast-evolving environment that demands agility, innovation, and customer-centricity.

Olayinka also highlighted the changing expectations of tech-savvy customers who want more personalized and seamless banking experiences. “Today’s customer doesn’t want to walk into a bank branch or fill endless forms. They want to manage their finances across multiple platforms in real time,” he explained. “Open banking allows banks to meet this need by offering tailored services that integrate with everyday digital experiences.”

In its report, KPMG outlined key recommendations for Nigerian banks. These include building secure and scalable API management systems, creating open banking units within their organizations, training staff on digital innovation, and conducting market research to understand emerging consumer behavior. The report further emphasized the importance of cybersecurity, noting that data protection will be a top concern as banks begin to open access to customer data.

The firm also cautioned regulators to ensure that open banking frameworks maintain a level playing field. According to KPMG, while the CBN’s guidelines have laid a strong foundation, continuous collaboration with stakeholders will be vital to creating an ecosystem where traditional banks, fintechs, and customers can all benefit.

Open banking is expected to create new products such as aggregated financial dashboards, automatic savings platforms, personalized credit scoring, and seamless cross-platform payment options. Industry observers believe that this will increase competition in lending, payments, and wealth management — areas that have historically been dominated by big banks.

Some Nigerian banks, especially Tier 1 institutions like Access Bank, GTBank, and Zenith Bank, are already piloting open banking models through collaborations with tech firms and internal API development. However, KPMG insists that much more needs to be done to scale these initiatives across the banking sector.

The consulting firm also identified small and medium-sized banks as particularly vulnerable in the new era. Without the resources to rapidly digitize and collaborate with ecosystem players, these institutions risk being marginalized by more agile competitors. “For smaller banks, the key will be to find niche value propositions and leverage third-party partnerships to stay relevant,” KPMG advised.

Fintech startups, on the other hand, are expected to benefit significantly from open banking by gaining access to customer data and account functionalities that were previously closed off. This could lead to the rise of ‘banking-as-a-service’ models and increased innovation in microcredit, insurance, and investment solutions tailored to underserved segments of the population.

While the full-scale adoption of open banking in Nigeria may still take time, KPMG emphasized that early movers will enjoy a first-mover advantage and the ability to shape customer expectations. As such, the firm urged all players in the financial ecosystem to act swiftly and decisively.

 

In conclusion, KPMG’s message to banks is clear: open banking is not a passing trend. It is a transformative shift that demands a rethinking of how banks operate, engage customers, and collaborate with third parties. Those who adapt quickly will secure their relevance in the digital economy, while those who hesitate may face obsolescence in the face of rapid financial innovation.