Digital Identity, KYC, and the Bottlenecks Slowing Down Nigeria’s Fintech Ecosystem

By Adetoyese Kola-Balogun

One of the quietest yet most persistent challenges in Nigerian fintech is identity, or more specifically, the absence of a unified and reliable way to verify it.

We talk about innovation often, and we are rightly proud of how quickly Nigeria’s fintech space has evolved. But beneath the surface of that innovation, there’s a recurring bottleneck that slows down scale and undermines inclusion. It shows up every time a user drops off during onboarding, every time a KYC check fails without explanation, and every time a promising product struggles to convert users who don’t fit neatly into the system.

The truth is, Nigeria’s identity infrastructure is fragmented. We have the Bank Verification Number (BVN), the National Identity Number (NIN), voter cards, driver’s licences, and SIM registration records. These systems are supposed to help verify individuals and improve access to services, but in practice, they exist in silos. Each one is maintained by a different institution, with different data quality standards and access models. There is no single, integrated layer that ties it all together in a way that fintechs, or even users can reliably trust.

This has real consequences. For startups and product teams, KYC is not just a regulatory obligation, it is a business-critical moment that can make or break user acquisition. Every additional form field, every rejected ID photo, and every failed match introduces friction. And in a competitive environment where attention spans are short and alternatives are plenty, that friction quickly becomes a liability.

More importantly, the people who struggle the most with current KYC processes are the very people fintechs claim to be building for. Informal earners, rural dwellers, people without formal education or fixed addresses, they often fall outside the range of what current identity systems can easily verify. If we are not careful, we will build a financial system that is digital but not inclusive.

We need to start thinking about identity as infrastructure, as critical to financial innovation as payment rails or mobile penetration. Without a strong identity foundation, everything built on top of it becomes unstable. Fraud becomes harder to detect. Customer support becomes reactive. Compliance turns into a series of workarounds. And trust, which should be a function of the system, becomes dependent on human intervention.

Fixing this will take more than better databases. It will require collaboration across regulators, telecom providers, banks, fintechs, and civil society. We need shared standards, shared APIs, and a willingness to treat developers as key stakeholders. Identity verification should be something that can be done in seconds, securely, with context-specific logic, not something that takes multiple retries or offline back-and-forths.

There is also the issue of inclusion. Millions of Nigerians still lack government-issued ID or have only one form of identification that cannot be validated across platforms. We must start thinking creatively about alternative data sources, from telecom metadata to cooperative society records to mobile wallet histories, and how they can be integrated into the identity conversation. Not everyone will fit neatly into a formal identity box, but that does not mean they should be excluded from access to credit, savings, insurance, or investment products.

Other countries have faced this challenge and made progress. India’s Aadhaar programme, despite its imperfections, demonstrated what is possible when digital identity is taken seriously as public infrastructure. Nigeria does not need to replicate Aadhaar, but we need our own answer, one that reflects our reality, our institutions, and our people.

For fintech builders, this is an opportunity to lead. We should not wait for the perfect government API before we start improving the KYC experience. There is room to build better fallback flows, to tier onboarding requirements based on risk, and to invest in real-time fraud prevention tools that do not rely solely on traditional ID. The best fintech products of the future will be those that can adapt to imperfect conditions without compromising compliance.

For regulators, the job is bigger than enforcing existing rules. It is about enabling progress by setting direction and creating infrastructure that can scale. That includes pushing for interoperability, supporting innovation sandboxes, and ensuring that identity frameworks serve the excluded as much as the included.

Solving digital identity may not generate headlines like funding rounds or flashy app launches, but it is the type of foundational progress that unlocks everything else. It is how we reduce fraud at scale, expand access to credit, and make digital finance truly inclusive.

If Nigeria’s fintech ecosystem wants to go from momentum to maturity, we cannot ignore the cracks in our foundation. And right now, identity is one of the biggest.

Adetoyese Kola-Balogun is a technology expert with deep experience in building financial systems. He has worked across the UK and Nigerian fintech ecosystems and writes about infrastructure, inclusion, and the real-world challenges of scaling digital products in emerging markets.