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    Heritage Bank Collapse: Nigerian Fintechs Scramble for Customer Trust, NDIC Safety Net Leaves Some Exposed

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    The recent collapse of Heritage Bank Plc has sent shockwaves through Nigeria’s financial sector, prompting Nigerian fintechs to scramble to reassure customers and rebuild trust. While some fintechs, like OPay, have touted their compliance with the newly increased deposit insurance limit of N5 million under the Nigeria Deposit Insurance Corporation (NDIC), many others remain outside this safety net, leaving their customers potentially vulnerable.

    The NDIC’s decision to raise the deposit insurance limit from N500,000 to N5 million was hailed as a significant step towards strengthening the financial system and protecting depositors. This move aligns fintechs like OPay with traditional commercial banks in terms of deposit protection, offering customers an added layer of security.

    However, not all fintechs in Nigerian are covered by the NDIC deposit insurance scheme. A list released on the NDIC website reveals that while major players like OPay, PalmPay, and KongaPay are covered, many smaller or newer fintechs are not. This disparity has raised concerns among customers and industry experts alike.

    CategoryInstitutions
    Mobile Money Operators CoveredAbeg Technologies Limited; Cellulant Nigeria Ltd.; Chams Plc; E-tranzact International Plc.; Funds and Electronic Transfer Solution; Fortis Mobile Money Ltd; Hendomark Nigeria Ltd.; KongaPay Technologies Limited; Mkudi Mobile Money; Now Now Digital Services Ltd.; Opay Digital Services Limited; Pagatech Ltd; Palmpay Ltd.; Parkway Project Ltd.; Teasy International Ltd.; Virtual Terminal Network Ltd.; Visual ICT Ltd.; Xpress Mts Limited
    Payment Service Banks Covered 9 PSB; Hope PSB; Money Master PSB; MOMO PSB; SmartCash PSB
    Microfinance Banks CoveredFairMoney Microfinance Bank; Carbon Microfinance Bank Limited; Brass Microfinance Bank Limited; Kuda Microfinance Bank Limited; Page Credit Microfinance Bank Limited; RenMoney (Rencredit) Microfinance Bank Limited; Seedvest Microfinance Bank Limited; VFD Microfinance Bank Limited. See other MFBs here.
    A table representing the Mobile Money Operators, Payment Service Banks, and Microfinance Banks covered by the NDIC deposit insurance scheme.

    “The Heritage Bank collapse has highlighted the importance of deposit insurance, especially for fintech customers who may not have the same level of awareness or understanding of the risks involved,” said financial analyst, Amaka Okeke. “The fact that not all [Nigerian] fintechs are covered by the new NDIC scheme creates a two-tier system where some customers are more protected than others.”

    In the wake of the Heritage Bank crisis, fintechs are grappling with the challenge of rebuilding customer trust. While those covered by the NDIC can leverage this as a selling point, others must find alternative ways to demonstrate their commitment to financial security. This could include strengthening internal risk management practices, partnering with established financial institutions, or exploring private insurance options.

    The Central Bank of Nigeria’s (CBN) revoked the operating license of Heritage Bank on June 3, 2024, due to financial instability and regulatory breaches.

    Financial InstitutionFormer MDIC* (N)New MDIC* (N)
    Deposit Money Banks (DMBs)500,0005,000,000
    Microfinance Banks (MFBs)200,0002,000,000
    Primary Mortgage Banks (PMBs)500,0002,000,000
    Payment Service Banks (PSBs)500,0002,000,000
    Mobile Money Operators (MMOs)500,0005,000,000
    A table representing the reviewed insurance cover as announced by the NDIC. *MDIC: Maximum Deposit Insurance Coverage (MDIC)

    The NDIC has assured Heritage Bank customers with deposits below N5 million that they will be fully compensated, providing some relief amidst the uncertainty. However, the broader implications of the bank’s collapse and the uneven application of the new deposit insurance scheme are likely to reverberate throughout the fintech industry for some time.

    As the dust settles, the Nigerian fintech sector faces a critical juncture. Rebuilding customer trust, adapting to evolving regulations, and ensuring adequate deposit protection will be key to navigating the challenges ahead and fostering a more resilient and inclusive financial ecosystem.

    1 Nigerian Naira equals 0.00064 United States Dollar 8 Jul, 17:02 UTC

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