Op-ed: To Make ePayments More Acceptable, Nigeria Needs to Curb Fraud
By Victor Irechukwu, Head of Engineering, OnePipe
When a credit alert drops on your phone, chances are you will get excited. Even if it wasn’t a surprise and you were expecting that money. But when it is a debit alert, there’s also a certain type of gloom you feel; you want money to keep coming in but as little as possible of it going out.
It may be safe to say most of us feel that way.
Now, imagine the debit alert was for a transaction you know nothing about. A commonly reported theme has been alerts that your card was used to make deposits on a gambling website, whereas you may never have even indulged in gambling your entire life.
At other times, you are shown a debit alert by someone who wants to purchase goods or services from you, but only later realise they showed you what has now been termed ‘fake alerts’. By this time, your goods, for instance, would have been long gone.
In recent months, social media has been awash with reports of money literally growing wings and leaving some people’s accounts to those of other people without authorisation. Many of these cases have gone viral on social media, causing embarrassment for the banks involved – The issues are either quietly – or corrected with public acknowledgement. But not all are resolved, at least not yet.
As much as the country and even individuals would like to go cashless, these bad experiences leave a sour taste in the mouth, and they have continued to rain on the parade as Nigeria marches towards a cashless economy. It must be stressed that a cashless economy does not mean theft of money will stop, what it does is to change how thieves go about it. But more importantly, it also doesn’t mean thefts must occur, at least not if systems are strengthened and the right protocols are put in place.
In the electronic world, an article on The Balance Money describes hackers as the bank robbers and muggers and in a cashless society we are all exposed to them. According to the Nigeria Inter-Bank Settlement System Plc (NIBSS), growth in the use of electronic channels, specifically mobile devices has also enticed fraudsters into focusing their efforts on these electronic channels.
When an attack is successful and the culprits are able to drain funds from your account, you could be effectively left stranded. God forbid you needed that money for a life threatening emergency because that could be the end unless you are one of the lucky few whose funds get recovered in a place like Nigeria – and on time too.
Agusto & Co.’s ‘2022 Consumer digital banking satisfaction index for Nigerian banks’, found that approximately 59 percent of respondents had been fraud victims on the digital platforms of their banks.
The figures in terms of number of attacks, success rate and amounts lost remain a source of concern. By the third quarter of 2022, the total number of frauds & forgeries cases reported by Nigerian banks was 19,314 as against 27,356 incidents reported in the second quarter of 2022.
But there’s more. While the number of attacks represents a 29.40 percent decrease between the periods, the total sum reported to be involved in fraud cases increased by 9.50 percent to N9.62 billion from N8.78 billion in Q2 2022. Also, for the total amount lost due to fraud incidents, there was a significant increase of 207.94 percent from N1.17 billion in the second quarter of 2022 to N3.62 billion in the third quarter of 2022.
In essence, the number of attacks may have decreased within that particular period, but more money was lost to the fraudulent attacks.
These insights were provided in the Q3 2022 report by FITC, an organisation mandated to receive data on fraud from all Nigerian banks and prepare quarterly reports. The figures show that the highest number of occurrences were recorded under computer/web fraud followed by mobile fraud which includes fraud activities through USSD transactions and ATM related fraud.
BusinessDay had even reported that every day between January and March 2022, there was an average of 450 incidents of frauds and forgeries against Nigerian bank customers. In those three months, the attackers targeted N14.65 billion, with Computer/Web Fraud responsible for N10.57 billion (72.18 percent), and Mobile Fraud recording 1.48 billion (10.08 percent).
Those 40,522 attacks had resulted in N1.54 billion lost by bank customers. Computer/Web Fraud accounted for 70.51 percent (N1.07 billion), followed by Mobile Fraud accounting for 17.58 percent (N270.92 million) at the time.
Going back a bit, data by NIBSS also showed that fraud attempts via mobile channel saw a 330 percent increase year-on-year (YoY) between 2019 and 2020, while attempts via web and POS channels saw a 173 percent and 215 percent increase YoY. In those nine months, 96 percent of the attacks were successful and there were 46,126 of such attacks.
“This trend is expected to continue as Nigeria further grows financial inclusion and customers become increasingly dependent on electronic channels for their day-to-day transactions,” said NIBSS. In other words; things are expected to get a lot worse, according to the organisation described as Nigeria’s central switch for the financial industry.
Fraud is and has always been a large threat to commerce and e-payment transactions. It is impossible to totally eliminate the chance of fraud, but applying timely measures and ensuring the use of secure payment infrastructure can help reduce or even eliminate these risks. Security should continue to be top priority for every party involved in ePayment transactions. Fraud prevention involves taking measures to stop fraud from occurring and taking steps to detect frauds quickly (when they occur) and stop them as soon as possible. Different techniques for preventing and detecting frauds are required as there are different types of fraud in e-payment transactions.
Awareness of these risks by merchants, consumers and individuals plays an important role in reducing fraud in e-payment transactions. Merchant awareness and education is important – they should be aware of the types of frauds, implications and application of best practices. Consumer awareness and education is also important in order to reduce identity theft or payment data theft. This would help the individual in adopting an active and cautious attitude when carrying out electronic transactions. It could teach them to be aware of possible risks, avoid e-scams, and minimise giving vital information to merchants (or other parties) when carrying out electronic payments.
