The Central Bank of Nigeria (CBN) has identified rising costs around digital identity systems and the growing complexity of artificial intelligence (AI) adoption as major challenges facing the country’s fintech sector, despite widespread use of advanced technologies across the industry.
In its latest Fintech Industry Report, released as part of the CBN’s Policy Insight Series, the apex bank noted that while Nigerian fintechs are increasingly deploying AI to manage fraud and customer operations, structural and regulatory constraints continue to limit the sector’s growth and financial inclusion goals.
According to the report, nearly 90 per cent of surveyed fintech firms now use AI tools, with fraud detection emerging as the dominant application. Other use cases include customer service chatbots, credit scoring, risk modelling and digital onboarding processes.
The CBN linked the surge in AI adoption to Nigeria’s rapid growth in digital payments, which has significantly increased transaction volumes and exposure to fraud risks. AI-driven systems, the report said, have become essential for monitoring transactions in real time and strengthening risk management frameworks.
However, the report warned that the benefits of AI are being tempered by high operational and compliance costs. Many fintech operators cited the expense of integrating advanced AI systems, limited access to quality data and regulatory uncertainty around AI governance as ongoing concerns.
Beyond AI, the CBN highlighted digital identity as a major bottleneck to fintech expansion. A significant number of firms reported that the high cost and complexity of digital identity verification, including Know Your Customer processes, make it difficult to onboard new users, particularly those in underserved and unbanked communities.
The absence of a fully unified, low cost digital identity infrastructure, the report noted, increases onboarding expenses and slows customer acquisition, undermining efforts to deepen financial inclusion.
Regulatory compliance also featured prominently among industry concerns. Many fintechs said approval timelines and regulatory processes can delay product launches by several months, while the cost of meeting evolving compliance requirements constrains innovation.
In response to these findings, the CBN said it is exploring policy measures aimed at supporting responsible innovation in the sector. These include the use of regulatory sandboxes for AI driven products, improved technology governance frameworks and closer collaboration with industry stakeholders to streamline digital identity and KYC systems.
Despite the challenges, the CBN maintained that Nigeria’s fintech sector remains resilient and innovative, with strong potential to drive economic growth if structural and regulatory barriers are addressed.
 has identified rising costs around digital identity systems and the growing complexity of artificial intelligence (AI) adoption as major challenges facing the country’s fintech sector, despite widespread use of advanced technologies across the industry.){kind=link}