Securing Nigeria’s payment systems
Efforts to stem the growing tide of electronic fraud in Nigeria are beginning to yield positive results. The Nigeria Inter-Bank Settlement System, NIBSS reported a 24 percent decline in losses to fraud in 2017. This decrease, which it says is occurring for the third year in succession, also salvaged about N2.4billion. In this report, CHINWE AGBEZE looks at the efforts by financial institutions to safeguard the integrity of e-payment channels.
On Wednesday, June 7, 2017, Idongesit Umoh, an entrepreneur in Lagos, said she moved N1.5million from one of her business bank accounts to another. According to her, she had requested for PTA from her bank for a trip to the United States, and the money she transferred was for that purpose.
The next day, Umoh said she tried to carry out a transaction, but got a message saying the credentials she had put in, were invalid. She typed in her mobile bank app a second time and got the same message before notifying her bank. The woman who picked the call told her to re-activate the call told her to re-activate her app. She did and typed in her PIN, but it said it was invalid again.
Umoh was told to visit the bank, but she resolved to do so the next day since it was almost 4pm and she was not close to the bank. Few minutes after she hung up, Umoh said she received debit alert messages with strange names. At that point, it dawned on her that her account had been hacked.
While hurrying to the bank, she instructed her bank through the customer service to block her account. Sadly, Umoh said her account was cleared of N2.1million with thirty minutes. After frequently the bank for a month, they refunded N668,000 and closed the case.
Umoh is just one out of the many victims of e-fraud in Nigeria. Available statistics by FITC puts the number of reported electronic fraud cases between 2001 and 2015 at 39,714. Available data from NIBSS revealed that e-fraud accounted for more than 60percent in value and 90 percent in volume of total fraud loss between 2015 and 2016.
To curtail the high incidence of e-fraud in the country, Nigeria electronic Fraud Forum, NeFF was created to actively and proactively react to the challenge to protect the e-payment channels.
Before the introduction of electronic banking, traditional payment systems using cheques and bank orders were the predominant means of payment in Nigeria. With the advent of E-banking, Nigerians swiftly embraced e-payment channels in carrying out their financial transactions. The reason for the adoption is not farfetched. The thought of performing transactions round-the-clock without having to visit the banking hall was enough attraction.
With increased acceptance, the e-payment systems grew and this was captured in NIBSS E-payment Fact Sheet for 2017. According to Fact Sheet, the total value of transactions from NIBSS Instant Payment (NIP), NIBSS Electronic Funds Transfer (NEFT), Points-of Sale (PoS) and Mobile transactions grew by 37.1 percent to reach N70.63trillion in 2017 compared to transactions value of N51.52 trillion in 2016.
The electronic payment system has continued to grow within the Nigerian payments industry. This exponential growth has been supported by CBN’s cashless policy initiative in 2012, to create an enabling environment for the paradigm shift within the Nigerian financial industry. The effective implementation of this policy created a ripple effect, with the increase in e-commerce businesses, innovative payment methods, rise of FinTech companies and mobile payment products.
As e-payment systems continue to grow with continuous adoption and various electronic payment technology and solutions, electronic fraud has also seen some growth. The advancement in technology, Fintech and payment systems to automate processes has shown that financial transactions have become increasingly vulnerable to hackers and cyber-criminals.
In NeFF’s 2016 annual report, 77 percent of the 19,531 fraud volumes reported in 2016 were related to electronic fraud. The growth in e-fraud keeps increasing, such that NeFF stated that, ‘‘It is evident that fraudsters still leverage more on the electronic platform to carry out their illicit acts.’’. In addition, the Centre for Strategic and International Studies estimated that cybercrime alone cost the global economy $445 billion in 2015.
However, the Nigeria Inter-Bank Settlement system (NIBSS) has cheery news for bank customers. NIBSS reported a 24 percent decline in losses to fraud in 2017. This decrease, which NIBSS says is occurring for the third year in succession, also salvaged about N2.4billion, which would have been lost over the same period.
‘‘No testament can be stronger than the indices rolled out by NIBSS than their acknowledgement that the industry was able to salvage much more than last year through its counteractive and collaborative approach,’’ said Dipo Fatokun, chairman, NeFF.
As part of the strategy of fashioning out new measures for protecting Nigeria’s payment system, Fatokun, who is also the director, banking and payment system, CBN, said the Forum held the 3rd in the series of annual retreats with the theme, ‘‘Operationalizing a four sided Approach to preventing Fraud’’, with special focus on Banking, Ecosystem, Law Enforcement and Telecommunication.
He said the ensuing engagement led the Forum to reach a resolution on how to battle e-fraud in 2018.
According to him, the Forum considered the speedy extension of the BVN to Other Financial Institution (OFIs) important to stem fraud in the industry, and the need to encourage the inclusion of e-payments as a course in the curriculum of the Law enforcement agencies.
Other resolutions include the need to fast track the initiatives with the Telco regulator (NCC), to find a lasting solution to SIM Swap and SIM recycle issues, establishment of coordinated Bank-Telco fraud desks to strengthen the handshake between financial and telecommunication industry, and the need for the CBN to encourage payments insurance as a way of enhancing customer fund protection and trust in the system.
Fatokun stressed the need for collaborative efforts to reduce electronic fraud in the banking industry.
‘‘We must all work together in ensuring that the payments environment remains strong and safe, by taking every reasonable step in ensuring that payment services are delivered not only fairly and transparently, but also safety,’’ the NeFF chairman said.
‘‘We are aware of the negative impact fraud has on consumer trust, which is an essential ingredient in building a sustainable payments system. We remain committed in ensuring that the Nigerian payments system is not only easy to use, but also reliable and trustworthy,’’ he added.
Adebayo Adelabu, deputy governor, operations, CBN stressed the essence of collaboration and how it has brought critical players in the payments system (banks, consumers, telecom operators and law enforcement) together under one umbrella objective, which is to fight electronic fraud.
‘‘This collaboration will no doubt bring to bear, increased knowledge and information sharing and deepen the payments industry’s capacity to succeed in this fight against e-fraud,’’ Adelabu said.
The Central Bank of Nigeria in collaboration with banks, NIBSS and other stakeholders have made giant strands in combating electronic fraud. However, there is need for improvement as fraudsters are getting wiser by the day.
Despite the anti-fraud efforts to subdue its monstrous growth, fraud is still pervasive. The positive impact of developments and improvements in technology on banking business is constantly being threatened by the activities of fraudsters, who daily evolve new devices to circumvent banks’ internal control systems. There is therefore need for collective industry effort to tame e-fraud.
Banks should not relent in enlightening customers on the changing tactics of scammers in electronic transactions. Anti-fraud education campaigns must use indigenous languages and also take into consideration the fact that some bank customers are not literate. Banks must show their customers how their cards work and how to get help when in trouble. Security officers who are not bank staff should not be allowed to deal with customers.
Automatic Teller Machine, ATM users should be taught to change their passwords sometimes. They must also be cautious about when and where they withdraw money to reduce the risk of attacks.
Despite the surge in fraud volume, the significant fall in actual los value established the fact that Nigeria is gradually winning the fight against electronic fraudsters.