How OPay Is Securing Users’ Funds, Building Trust In E-payment System

In a bid to secure the funds of its users, OPay has ensured that all funds are now insured up to N5 million under the Nigeria Deposit Insurance Corporation (NDIC).

This move not only underscores OPay’s commitment to financial security but also aligns it with the standards enjoyed by depositors of other commercial banks.

Recall that the NDIC has announced the upward review of maximum deposit insurance coverage for various categories of deposit-taking financial institutions licensed by the Central Bank of Nigeria (CBN) with immediate effect.

The maximum deposit insurance coverage for depositors of Deposit Money Banks (DMBs) has increased from N500,000 to N5,000,000; Microfinance Banks (MFBs) from N200,000 to N2,000,000; Primary Mortgage Banks (PMBs) from N500,000 to N2,000,000; Payment Service Banks (PSBs) from N500,000 to N2,000,000 and subscribers of Mobile Money Operators (MMOs) from N500, 000 to N5,000,000 per subscriber, aligned with DMBs’ coverage level.

The MD/CEO of NDIC, Mr. Bello Hassan, who made the announcement at a press conference in Abuja, said the Interim Management Committee (IMC) of the Corporation approved the revised maximum deposit insurance coverage during its 18th meeting held on April 24 and 25, 2024. He said the decision is in line with the Corporation’s commitment to enhancing depositors’ protection, bolster public confidence, financial inclusion, and stability of the financial system.

Hassan highlighted that the last review was conducted in 2016, and had therefore become imperative to review the coverage level in line with the Principle 8 of the International Association of Deposit Insurers (IADI) Core Principles for Effective Deposit Insurance, which advised jurisdictions, to periodically review their deposit insurance coverage, to ensure that, it is credible and cover large majority of depositors to prevent risk of bank runs, but leave a substantial amount of deposits exposed to market discipline. Consequently, the Corporation conducted a Study in 2023, to determine the adequacy of its Maximum Deposit Insurance Coverage.

In arriving at the new coverage levels, Hassan said the study, considered factors such as deposit distribution, impact of inflation, per capita GDP, and exchange rate among others, using statistical models.

He explained that the new coverage for DMBs now covers 98.98 per cent of total depositors and 25.37 per cent of total deposits while that of MFBs covers 99.27 per cent of total depositors and 34.43 per cent of total deposits.

For the PMBs, the coverage covers 99.34 per cent of total depositors and 21.04 per cent of total deposits while for Payment Service Banks (PSBs) 99.99 per cent of total depositors would be covered which makes up 43.10 per cent of total deposits.

Hassan stressed that, the revised deposit insurance coverage has balanced the NDIC’s goals of deposit protection and financial system stability with incentives for depositors to practice market discipline and prevent banks from unnecessary risk-taking and moral hazard.

Consideration was given to ensure that the coverage was limited but adequate enough to protect a large number of depositors and credible enough to prevent the destabilizing effect of bank runs, he stated.

On funding, the NDIC Boss disclosed that the adoption of the revised maximum deposit insurance coverage is supported by the Corporation’s current funding represented by the balances in the various Deposit Insurance Funds (DIFs), expected annual premium collection, enhanced supervision that would reduce the likelihood of bank failures, effective bank resolution frameworks and other funding arrangements provided by the NDIC Act No. 33 of 2023.

While shedding light on the powers of Corporation to review the coverage level, Hassan said the revision is backed by Section 25(2) of the NDIC Act 2023, which empowers the Corporation to vary upwards the maximum amounts a depositor shall receive from the Corporation in respect of deposits of failed insured institutions.

OPay Reacts

In its reaction, the management of OPay however applauded the move by NDIC in ensuring that users funds are secured.

“We applaud the NDIC’s decision to enhance deposit insurance coverage. This strategic move not only aims to protect depositors but also encourages market discipline among banks and Mobile Money Operators (MMOs). By increasing the insured amount, the NDIC seeks to prevent unnecessary risk-taking by financial institutions, thereby reducing the potential for destabilizing bank runs. OPay’s alignment with the NDIC’s revised insurance coverage standards underscores our dedication to safeguarding user funds and promoting financial stability. With this new level of insurance as our users can now have the same confidence in the security of their deposits as customers of other commercial banks. This move contributes significantly to a more inclusive and resilient financial ecosystem in Nigeria.

“In line with the NDIC’s revised insurance coverage, OPay has ensured that all funds are now insured up to N5 million under the Nigeria Deposit Insurance Corporation (NDIC). This enhancement underscores our commitment to financial security and aligns us with the standards enjoyed by depositors of other commercial banks. We are dedicated to implementing robust security measures and maintaining transparency to ensure our users’ funds are protected. Our alignment with the NDIC’s revised standards further solidifies our efforts in building trust and confidence in the e-payment system,” OPay stated.

OPay however advised its users to always follow best practices for securing their accounts. “This includes regularly updating passwords, enabling two-factor authentication, and being cautious of phishing attempts. Users should also keep their account information private and report any suspicious activity to our customer service immediately. By staying vigilant and informed, users can help us ensure the safety and security of their accounts. Rest assured, OPay remains committed to safeguarding your funds and providing a secure financial platform,” It added

What you should know

Deposit Insurance is a system established by government to protect depositors against the loss of their insured deposits placed with member institutions in the event that a member institution is unable to meet its obligations to depositors. It engenders public confidence in, and promotes the stability of, the banking system by assuring savers of the safety of their funds

If a financial institution is unable to meet its obligations to depositors due to operational problems or business failure, anxious depositors may cause a run on the bank as well as other healthy institutions. The government has therefore established a deposit insurance mechanism, under which the NDIC is empowered to provide protection for small depositors and contribute to financial and social order.

The NDIC could pay depositors of a failed insured institution either by transfer to a financial institution with instructions to effect payments to depositors on its behalf, or directly by means of issuing cheques up to the insured limit which will be collected at the NDIC’s designated centres, usually the closed bank’s offices or by directly crediting the depositor’s account using e-payment platform.

Payments could also be made through Purchase and Assumption, whereby a healthy bank assumes part or all of the deposit liabilities of a failed insured bank and depositors could either withdraw the money at the acquiring bank or continue to maintain its account with the bank.