To make ePayments work, Nigeria needs to curb fraud

By Victor Irechukwu, Head of Engineering, One Pipe

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.

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 with many of these either quietly returned or with public acknowledgement. But not all are resolved, at least not yet.

In as much as the country and even individuals would like to go cashless, these bad experiences occur a lot and 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.

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. 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.

Going back a bit, data by NIBSS also showed that fraud attempts via mobile channels 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.

It then also begs the question; how much fraud should be acceptable?

NIBSS’ role as the Nigerian central switch means it processes upwards of 10 million transactions on a daily basis. Statistically, even if the successful fraud rate was only one percent, it would result in 100,000 successful fraudulent transactions in Nigeria daily! Clearly, there can be no room for fraudulent transactions. Importantly, with every unresolved case, confidence in e-payment – and going cashless – will pay the price.