The saying that technology moves faster than regulation will always hold true regardless of the sector. Whether it is generative AI, self-driving cars, or financial services, regulation often plays catch-up to innovation.

In Nigeria’s financial services sector, regulators have frequently had to respond to the rapid pace of fintech innovation. For example, before the Central Bank of Nigeria introduced guidelines for Payment Service Banks in 2018, companies like MTN were already partnering with financial institutions to allow subscribers to open bank accounts.

The PSB license was pivotal in enabling MTN’s MoMo to formally accept deposits, hold funds in electronic wallets, offer savings products, facilitate person-to-person transfers, and provide PoS and ATM services. It also allowed MoMo to expand its network of physical banking agents for deposits, payments, and withdrawals.

The story is the same with the Payment Solution Service Providers’ licence. Payment gateways like Flutterwave and Paystack existed before the CBN issued the guidelines for the license in 2020. Licences and regulations play an essential role in financial services, as they ensure companies operate within a framework that protects consumers, maintains trust, and preserves the stability of the economic system.

However, innovators and regulators often find themselves at odds due to the differing paces at which they operate. Fintech companies constantly push boundaries, introducing new technologies and disrupting traditional practices, while regulators take a more measured approach to ensure consumer protection and financial stability.

Striking a balance between innovation and regulation is the key to fostering a financial ecosystem where technology can flourish without compromising security and trust.

A company making strides in this space is Zone, which is not only innovating to enhance financial services in Nigeria but also reimagining how compliance and regulatory oversight can work seamlessly alongside innovation.

Zone’s solution is the first of its kind in Africa and has even been described as the most innovative financial technology in Nigeria since the creation of NIBSS. The company is using its regulated blockchain network, to ease regulation and create financial innovation at the same time.

This blockchain-powered payment infrastructure network provides financial institutions on its network with superior capabilities where payment processing is concerned. The decentralised architecture improves payment processes by making them faster, safer, and more cost-efficient.

This innovation is best demonstrated through Zone PoS, the company’s decentralised payment infrastructure for PoS-based payment transactions. The gateway connects financial institutions on Zone’s blockchain network together without an intermediary, thereby enabling seamless communication and eliminating points of failure associated with traditional centralised infrastructure.

With its switching licence, Zone’s network transforms participating financial institutions into switches themselves. This direct connection eliminates failure points and enables real-time awareness of transaction statuses.

One of the most notable benefits of this approach is the speed of error resolution. For example, when payment errors occur in traditional systems, the payment switch must gather information from both banks to identify the problem, often taking days.

With Zone’s direct connections, both institutions have immediate visibility into the transaction, allowing them to resolve errors in minutes.

This streamlined communication also benefits regulators. By hosting a blockchain node within Zone’s network, regulators can monitor transactions in real time, ensuring oversight without introducing unnecessary friction.

It is no surprise that Zone has struck a partnership with a key regulatory affiliate like Nigeria Inter-Bank Settlement System Plc, to enable IT to perform its PTSA function on the blockchain seamlessly while maintaining regulatory oversight.

Zone’s integration of regulation into its blockchain solution redefines the relationship between innovation and oversight. By embedding compliance into its core, Zone has created a model where regulation strengthens innovation rather than trailing behind it. If this approach gains traction, the financial services sector could witness a future where regulators no longer play catch-up but lead alongside innovators, ensuring a stronger and more resilient ecosystem.