By Victoria Oloni.
Introduction
My world has been inundated with the constant chatter about regulating emerging technology. It seems like everywhere I turn, people are discussing it - from fancy panel sessions to lively university debates, articles, social media, and even casual conversations. And yet, here I am, diving headfirst into the fray to add my two cents.
I often find myself starting my articles without any structure or outline. It's just an idea that's been gnawing at me, a thought I can't shake. Today, that thought is the barbershop analogy that was shared by a speaker from Meta at a panel session during the ILA-NG Annual Conference. This analogy perfectly sums up the issue of regulating emerging technology - it's like trying to cater to the needs of adults, teenagers, and toddlers all at once in a bustling barbershop.
So, let's dive in and explore the nuances of this analogy and what it means for regulating technology. Are you ready to get your haircut?
The Barbershop Analogy (I definitely added my own flavour and extra spice)
Once upon a time, there was a skilled barber who had a trusty clipper that he used to give his adult clients the perfect haircut. One day, a young mother brought in her toddler for a trim, and the barber thought, "No problem, I'll use my trusty clipper." But as soon as the clipper buzzed near the child's head, all hell broke loose. The child was screaming and squirming, and the barber was at a loss for what to do.
After the traumatic incident, the barber realized that he couldn't use the same approach for every client. He needed to exercise different levels of skill and style when cutting a child's hair than an adult's hair. In the same way, regulators must exercise different levels of oversight and strategy when it comes to emerging technology.
The clipper was not to blame for the child's distress; it was the barber's lack of adaptation that caused the chaos. Similarly, emerging technology is not inherently good or bad; it's how we regulate and manage it that determines its impact. Just as a skilled barber knows how to adjust their technique for each client, regulators must also adjust their approach to ensure that emerging technology is harnessed for the greater good, rather than causing unintended harm.
(I really just felt like Jesus giving a parable, pure chills mehn!)
Let's examine the different "customers" in the barbershop in the financial services sector context
The Adults - Established Financial Institutions:
The adults in the barbershop in the Nigerian financial services sector are represented by established financial institutions such as First Bank, GTBank, Access Page 2 of 4 Bank, and Zenith Bank. These institutions have obtained the requisite licenses and have been around forever. They have large research and compliance teams with compliance track records for days. They appear to be embracing technology with the launch of mobile apps, USSD Codes. Some even go as far as setting up their own fintech arms- Alat, and Habari to name a few. They have the capital, the track record and customer trust to absorb the shock of regulation and “fend off all fiery darts of the enemy”.
Sincerely, I would also put Flutterwave, Paystack, and Interswitch in this category but I am not willing to start a war I cannot end. So just imagine that you did not read the previous statement.
The Teenagers - Fintech “Startups”:
Teenagers in the barbershop in the Nigerian financial services sector are represented by fintech “startups” (I am not even sure what this word means anymore and I do not agree with the qualifications under the Startup Act) such as PiggyVest, Cowrywise, the Kudas and Carbons, Bamboo, Chaka and PALMPAY!! (IYKYK). They have been around for long enough to build a customer base and a track record. They have picked up one or two CBN/SEC licenses and are a very important stratum in the fintech ecosystem. They have raised one or two or three funding rounds and are pretty familiar with the regulatory and compliance landscape for the financial services sector. They have poached all the young “tech lawyers” (whatever that means) from law firms to do their legal and compliance.
The Children- Fintech Startups:
These are the young, starry-eyed startups with a passion for disrupting traditional banking, providing innovative solutions, and “banking the unbanked”. They may not have the faintest idea of how to navigate the complex industry or the deep pockets to fund lobbying efforts but they sure are passionate. Some of them don't even have the proper licenses to operate; they might be running lending platforms with money lender licenses ( I'll break that table someday) or relying on the new FCCPC "registration” for lendtechs. While they do need some regulations to keep things fair with the "old guard," they're also worried that excessive rules could stifle innovation and prevent them from competing with traditional banks. These are the perfect candidates for the CBN sandbox and SEC incubator program (*coughs, me I don’t know about that one oh). I'm not going to call them out by name...yet.
The Toddlers - Customers:
The final category in the barbershop in the Nigerian financial services sector is the customers and other stakeholders who may be affected by emerging technologies but may not have a direct voice in the regulatory process. These customers need protection from potential harm that may arise such as data breaches, cyberattacks, and privacy violations. Customers rely on regulators to safeguard their interests, but they may not have the expertise or resources to protect themselves from these risks.
I used the fintech analogy because it is probably the most relatable but you can take this and replicate it anywhere in the eco-system…in Healthtech, Edtech, Proptech. Because really what we call the tech eco-system is simply using technology to drive traditional business models. Just for fun, let’s do one for healthcare which I believe is less stratified
The Adults - Traditional Healthcare Providers:
These old guards have been around for decades (it’s giving ancient of days). They have a significant amount of power and influence within the industry and are often well-connected to government officials and regulatory bodies. They have obtained the necessary licenses and certifications to operate and have compliance teams to ensure they are meeting regulatory standards. Examples of these established providers in Nigeria include St. Nicholas Hospital, Lagoon Hospital, and the National Hospital Abuja.
The Children - Healthtech Startups:
These startups leverage emerging technologies such as artificial intelligence, telemedicine, and wearable devices to provide more affordable and accessible healthcare Page 3 of 4 solutions. Examples of these startups in Nigeria include LifeBank, which uses technology to deliver blood and other medical products to hospitals, Helium Health, which provides electronic health records management software, Reliance HMO which leverages technology to provide health insurance services etc
The Toddlers - Patients and Consumers:
Finally, there are the patients and consumers who rely on healthcare services in Nigeria but may not have a direct voice in the regulatory process. Overall, the different customers in the barbershop highlight the complex and competing interests involved in regulating the tech ecosystem. To effectively regulate, policymakers must balance the needs and interests of all these stakeholders and consider the potential impacts of regulations on innovation, competition, and public safety.
But before we even talk about balance, Should “tech” even be regulated?
I am a lawyer so YES! Just kidding. The answer to whether emerging technology should be regulated is not straightforward and depends on various factors. On the one hand, regulation can help protect consumers and other stakeholders from potential harm, such as data breaches, cyberattacks, and privacy violations. It can also promote fairness and competition in the market and ensure that emerging technologies are developed and used in ways that align with societal values.
On the other hand, overly restrictive regulations can stifle innovation and hinder economic growth. Emerging technologies often have the potential to revolutionize industries and provide significant benefits to society. If regulations are too burdensome, they could prevent or slow down the adoption and development of these technologies. Now this is a paradox that poses a huge challenge
What then are the challenges?
Regulating “tech” in Nigeria is no easy feat, and there are several challenges that regulators must face. One of the major challenges is the rapid pace of technological advancement, which makes it difficult for regulatory frameworks to keep up. If I have a dollar for every time I hear “Regulation is always playing catchup with innovation”, I will be retired, in Ibiza with Davido having Timeless enjoyment. Lawmaking and policy development are by their nature slow and bureaucratic and tech waits for no one. GPT-1, 2, 3, and now 4 and Nigeria doesn’t have an AI policy yet (actually a lot of countries don’t have national AI laws/policies). Let us look at blockchain, the blockchain policy is still in draft form, the same as our National Data Strategy. Once again, the regulators have been left behind.
Another challenge is the lack of technical expertise among regulators. Many emerging technologies are highly technical and require a deep understanding of the underlying concepts to regulate effectively. Regulators need to understand the nuances of the technology and its potential impact on society, which requires specialized knowledge that is not always available within regulatory agencies. At this point, I must give some of the Nigerian regulators some credit because they obviously have not come to play. MDAs have joined the talent war and are poaching some of the best brains from the private sector to steer their affairs. There has also been a rise in stakeholder engagements before the issuance of regulations and guidelines with CBN leading the pack. The CBN gives everyone nightmares but we have to give them some credit for their stakeholder engagement (exposure draft every 5 business days to keep the eco-system interesting). As Tayo of Paga once said, they may not agree with you but they sure will listen and engage so yes, the future is not so bleak.
Another challenge is the challenge of enforcing regulations. In Nigeria, enforcement mechanisms are often weak, and regulatory agencies may lack the resources to effectively monitor and enforce Page 4 of 4 compliance. For example, despite the overzealousness of CBN, we all know one fintech that is operating without a license and processing billions in transactions (at least according to their pitch decks).
Finally, we have the challenge of striking the right balance between regulation and innovation. As previously stated, overly restrictive regulations can stifle innovation and prevent these companies from reaching their full potential. At the same time, too little regulation can result in abuses and negative consequences for consumers and the broader society. Therefore, a balance must be struck between promoting innovation and ensuring that emerging technologies are developed and used in a way that protects society.
So how can we strike a balance? (now that is a question that is above my pay grade)
But here’s my 2 cents (a whole 2 cents in this economy?)
Striking a balance means making smart and targeted regulation that takes into account the unique characteristics of the technology and the risks it poses. How then can we make smart and targeted regulations? Collaboration my dears! Collaboration! Striking the balance requires a collaborative approach that involves a motley crew of stakeholders. We're talking about government agencies, private industry players, civil society groups, and experts all coming together like a Justice League of regulators (or Avengers if you are a Marvel fan). It's like a superhero team-up to create effective regulations that make sure new technologies are developed and deployed responsibly.
We need to focus on "how well" we regulate, not just "how far or fast" we can do it. It's about taking the time to get it right and working together to make it happen. We need more than just a pile of laws - we need effective regulations that catalyze growth, not a wet blanket for innovation. And let's be honest, relying solely on the lawmakers to do all the work is like asking your grandma to fix your iPhone.
Collaborative approaches can take several forms, like public-private partnerships, co-regulation, and multi-stakeholder governance. For instance, in the European Union, the government worked with privacy advocates to develop the General Data Protection Regulation (GDPR) that protects personal data while allowing for innovation in the technology industry. And if you want a more relatable example, let's talk about the Startup Act signed into law by President Buhari in 2022. This was a joint initiative by Nigeria's tech startup ecosystem and the Presidency, and it showcased the power of cocreated regulations to unleash the full potential of our digital economy. It's time for a little regulatory teamwork! The National Digital Economy Policy and Strategy (NDEPS) is another example of collaboration between the Nigerian government and the tech industry. The CBN and the SEC have also each established regulatory sandboxes/incubators to enable fintech startups to test their innovative solutions in a controlled environment, without being subject to the same regulatory requirements as established banks (CBN released its call for applications for the first cohort sometime last year). If done right, this can be a game changer in the ecosystem and a template for other sub-sets to follow.
In Conclusion
The barbershop analogy reminds us that regulating emerging technology is not a one-size-fits-all approach. It requires a delicate balance between promoting innovation and protecting consumers. Just like a barber needs to listen to each customer's unique needs and preferences, regulators need to collaborate with various stakeholders to develop effective regulations that work for everyone. So, let's embrace our inner barber and approach technology regulation with a keen ear, a steady hand, and a sharp pair of scissors (metaphorically speaking, of course). And who knows, maybe one day we'll be able to pay for our haircuts with cryptocurrency!
Originally published by Victoria Oloni on LinkedIn
Reach Victoria Oloni on LinkedIn.
Oyemaja Law.