Fidelity Bank restricts transfers to Opay, Palmpay, others

Nigerian commercial bank Fidelity Bank is restricting consumer fund transfers to neobanks, including Moniepoint, Kuda, OPay, and PalmPay, said multiple sources with direct knowledge of the matter.

A week ago, a small number of customers first noticed that these neobanks were no longer listed on the list of approved financial institutions on the Fidelity Bank app. At least five sources have now confirmed the development.

The affected digital financial services remain unavailable for selection on Fidelity Bank’s mobile app at press time. While the bank informed customers that the restrictions were related to an app upgrade, two people with direct knowledge of the matter and other sources at the affected fintechs told a different story.

Five people close to the situation, the transfer restrictions began at least two weeks ago over rising fraud and customer verification concerns. OPay denied being affected by the restrictions, despite complaints from customers saying otherwise.

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Reacting, Sofia Zab, Palmpay’s Chief Marketing Officer said: “We have been informed by Fidelity Bank that the removal of PalmPay from the list is temporary and not due to any perceived issues with PalmPay but due to a necessary system upgrade on Fidelity Bank’s side.” A source at Moniepoint also confirmed the restriction. Fidelity Bank declined to comment for this story.

Sources connected to the bank explained that the restrictions are related to mounting fraud losses.

 At least three banking industry experts said that Nigerian banks and fintech companies have suffered massive losses to cyber-attacks and fraudsters since the start of the year.

“The issues are due diligence and KYC,” said a bank source who asked not to be named. “Until they get their house in order, they will continue to experience issues [like being blocked] by banks.”

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According to two people at fintech startups, while Fidelity Bank did not share specific KYC concerns, the neobanks are working to understand the issues.

“It’s just a case of a kettle calling a pot black,” one expert said. “While neobanks can be loose about their KYC, the traditional banks also don’t conduct their KYC well. They may be stringent with you when they start, but I doubt if they verify these documents, especially when you change them.”

Away from these anti-fraud systems, there are valid questions about whether a bank can unilaterally restrict transfers to another bank, and the CBN Customer Due Diligence Regulations 2023 is silent on the matter. Existing regulations state that banks should have a risk management framework in place to identify and mitigate the risks.