Payment channel fraud losses drop to near 3-year low

The total amount of money lost to fraudulent activities in Nigeria across payment channels dropped to the lowest in at least 10 quarters (30 months) in the first quarter of 2023, according to a new report.

The latest report on Frauds and Forgeries in Nigeria Banks by the Financial Institutions Training Centre (FITC), said the sum declined by 85.2 percent to N472.3 million in Q1 from N3.18 billion in the previous quarter. The sum reported to be involved in fraud cases also reduced by 79.4 percent to N2.6 billion.

“During the reviewed quarter, there was a considerable decrease in the total number of reported fraudulent cases. The amount involved and lost due to fraudulent activities within the Nigerian Banking system,” it said.

It said although there has been a decrease in the recorded cases fraud, the prevailing incidents of fraudulent activities remain a significant concern.

It added that during Q1, there was a significant increase of 89.5 percent (from 38 staff to 72 staff) in the participation of bank employees in fraudulent activities.

‘There was also an 8.1 percent decrease in outsider involvement in fraudulent activities, with the number decreasing from 13,436 outsiders in the previous quarter to 12,351 in Q1.”

A breakdown of the report shows that of all the fraud activities, mobile fraud, computer/web fraud and Point of Sales-related fraud were the top three frauds with the highest number of occurrences.

“Mobile fraud accounts for 34.1 percent at N161 million followed by Computer/web fraud accounting for 27.7 percent at N130 million and Fraudulent withdrawals representing 24.7 percent at N116 million,” it said.

According to stakeholders in the digital industry, the growing cyber security threats which can also be associated with fraud activities could ultimately hinder financial inclusion.

Assane Gueye, professor at Carnegie Mellon University Africa said as more people are moving into the financial inclusion net, we should be mindful of the things that can hinder the successes of it such as cyber security attacks.

He said while we are developing the technologies to include more people, it should be more secure or preserve peoples’ data and privacy and also align with people’s reality. “We should be more intentional that these technologies will bring more good and not harm.

Authors of the FITC report recommend Nigerian banks to establish robust internal control systems that can effectively detect and prevent fraudulent activities.

“Such systems can help to safeguard the interests of both the banks and their customers and promote trust in the banking sector.”

They added that these systems also include implementing adequate segregation of duties, regularly reviewing and reconciling transactions, and limiting access to sensitive data.

“Banks should invest in modern fraud detection technologies that can identify and flag suspicious transactions and patterns, such as machine learning algorithms and artificial intelligence tools.”