• Tuesday, October 15, 2024
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Online fraud thrives as banks’ IT spend hits N196bn

Online fraud thrives as banks’ IT spend hits N196bn

Six commercial banks increased their spending on technology, including cybersecurity, by 176.09 percent to N196.89 billion percent in the first half of 2024 compared to the same period in 2023. However, fraud within the banking halls surged by 589.01 percent during this period.

According to a recent Financial Institutions Training Centre (FITC) report, banks suffered a total loss of N43.12 billion due to fraud in H1 2024, a jump from N6.26 billion recorded in H1 2023. The report highlighted an 8,993.04 percent increase in fraud-related losses, from N468.49 million in Q1 2024 to N42.6 billion in Q2 2024.

In the period under review, FITC received 80 returns on fraud and forgery cases from 28 deposit money institutions. However, this news report covers the IT spending of six banks: Access Holdings Plc, the parent company of Access Bank, Guaranty Trust Holding Company (GTCO), the owner of GTBank, Zenith Bank, Stanbic IBTC Holdings Plc, Wema Bank, and First City Monument Bank.

Read also: FITC urges Nigerian banks to enhance auditing procedures to tackle N42.6bn loss to fraud

IT spending in Banks

Access Bank led the way in IT and e-business expenses, spending N111.24 billion — a 265.13 percent increase from N30.47 billion in H1 2023. GTCO’s tech expenses rose 115.09 percent to N36.60 billion from N17.02 billion. Zenith Bank’s IT expenditure climbed 166.29 percent to N23.09 billion, compared to N8.67 billion the previous year. Stanbic IBTC’s expenses grew by 110.95 percent to N15.86 billion from N7.52 billion. FCMB increased its spending by 29.39 percent to N8.97 billion, and Wema Bank’s tech expenses rose by 59.41 percent to N1.13 billion.

Rising Fraud Cases

FITC reported 23,004 fraud cases in H1 2024. The most prevalent types included computer/web fraud, mobile fraud, and POS-related fraud, following trends from 2023 and Q1 2024. The analysis revealed a rise in fraud losses across all payment channels except for mobile fraud, which saw a decline.

The Nigeria Inter-Bank Settlement System (NIBSS) recently stated, “The amount lost to fraud has increased over the past five years along with the growth of financial transactions in the digital payments sector,”

According to the International Criminal Police Organisation (INTERPOL), financial fraud has increased and expanded in scale and method. “Today, financial fraud represents a pervasive, global threat,” it said.

JP Morgan’s annual payments fraud survey indicated a 10 percent rise in card-related fraud in 2022, while INTERPOL’s May 2024 report emphasised the growing threat of online fraud across Africa.

Read also: Banks lose N43bn to fraud despite heavy investment in IT

The Fight Against Fraud

Aware of this, Nigerian banks have committed to investing more in combating fraud. Five commercial banks recently announced plans to invest N248.21 billion in technology upgrades over the coming months, and cybersecurity will receive N59.69 billion. GTCO recently noted that many countries, including Nigeria, lack strong security and consumer protection measures, which could leave people vulnerable to attacks.

Technology alone isn’t enough

However, investments in tech might not be enough to curb fraud as, according to FITC, 96.46 percent (N41.14 billion) of the total amount lost to fraud in Q2 2024 was due to miscellaneous and other fraud types.

“With specific reference to the ‘insertion of fictitious amount into settlement’ type of fraud, which gulped a large portion of the total amount involved and lost in Q2, 2024,” the institution said.

Adedeji Olowe, founder and chief executive officer of Lendsqr, pointed out that banks already have the tools to tackle fraud. “They are not being used. Technology is not the problem,” he said.

Pwapo of Resilience Technologies noted that overlapping roles within the banking sector create perfect conditions for some fraud types to thrive. Earlier in 2024, a First Bank staff member allegedly made away with N44 billion.

FITC noted that banks need to enhance monitoring and auditing procedures. “Deposit money institutions can utilise AI-driven tools that flag unusual entries or patterns to implement continuous and automated monitoring systems that can detect anomalies or discrepancies in settlement files,” it recommended.

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