Bank customers groan as e-fraud worsens e-payment nightmares

The cashless banking initiative which led to enhanced use of digital payment channels has no doubt redefined the face of banking. Aside from the convenience, speed, and cheaper access to banking services that come with e-payment adoption, many customers have also celebrated easy access to loans. However, the gains of digital payment are being eroded by rising cases of e-frauds and loss of funds by customers. BAMIDELE FAMOOFO writes that the rising cases of e-frauds have come to represent one of the biggest nightmares of e-payment to customers and should be tamed to engender confidence in the financial system.

Bernard Thompson, a computer software developer was one of the first adopters of e-payment. For him, cash has little or no place in today’s world given the rising profile of digital payment channels.

He held that view until he lost N1 million to e-fraudsters, who cloned his Automated Teller Machine card and made away with his money.

Thompson is one of the cardholders that, according to Nigeria Electronic Fraud Forum, lost over N12.8 billion annually to e-fraudsters.

Today, he calls for caution on the part of the customers and the banks. He said customers should protect their data from third parties, while banks guard against insider abuses.

“I think the banks and customers have roles to play. Customers should protect their personal data while banks should fortify their systems and guard against insider abuses,” he said.

Internet banking, mobile banking, Point of Sale (PoS), Automated Teller Machines (ATMs), Unstructured Supplementary Service Data (USSD), web payment, Nigeria Quick Response (NQR) code, among other e-payment channels are now dominant modes of payment by a large part of the population.

The e-payment channels have equally exposed the banking system to enormous risks from e-fraudsters.

For instance, nothing forewarned Michael Abiodun, a Lagos tyre merchant in Mushin, of the problem he would soon face.

That Saturday, a customer bought goods worth N120, 000 from him. The customer said he had no cash and requested Abiodun’s account details to transfer the money.

He said: “He typed the number on his phone and within a few minutes, I got a transaction alert from my bank. The fake alert showed that N120, 000 had been credited to my account. So, the fraudulent customer took the goods and went away.

“The next working day, which was Monday, I went to my bank to withdraw the money but it was not there. My account officer showed me my last transaction details, and informed me that the alert on my phone was not from the bank and that it was a fraud. That was how I lost the money and all efforts to trace the fraudster failed.”

Abiodun released the goods because the fake alert showed his previous account balance and the new deposit by the customer. That, he said, was an indication that the fraudster was collaborating with an insider from the bank. “Up till today, I have not recovered that money,” he disclosed.

“The next working day, which was Monday, I went to my bank to withdraw the money but it was not there. My account officer showed me my last transaction details, and informed me that the alert on my phone was not from the bank and that it was a fraud. That was how I lost the money and all efforts to trace the fraudster failed”

That horrible experience, Abiodun noted, has made him to always check his account balance with mobile apps or through internet banking channels before releasing his goods, instead of relying solely on bank alerts, which has the possibility of being cloned.

A vulcanizer popularly known as Baba Wariz in Mowe, Ogun State, was another prey in the hands of internet fraudsters.

This is how he narrated his story: “I was in my workshop on this fateful day when a man approached me and informed me that he would want me to help him to purchase four fairly used tyres which will cost N60, 000. I was excited because I knew I would also make some gains from the transaction. But he then told me that he does not have cash to pay and that he will transfer the money into my account, which I accepted. So, we approached a POS point by my workshop to disburse the cash when he showed a debit alert that the money had been paid into my account, only for us to discover later that it was a fake debit. But the deed had been done as he eventually disappeared with the money.” Lamenting, Baba Wariz said he paid for what he did not eat.

59% of Nigerian e-banking customers have been victims to fraud – Report

A survey carried out recently by Agusto&Co has revealed that 59 per cent of bank customers sampled indicated that they have fallen victim to fraud.

According to the survey, 41 per cent said their accounts hadn’t been compromised, “however, the remaining had been victims through phishing emails, data breaches, unauthorised access to accounts through USSD, and others.”

Agusto&Co in its ‘2022 Consumer Digital Banking Satisfaction Index’ also called for investment in cyber security and awareness to avert bank customers falling victim to breaches in their accounts.

“Approximately 59 per cent of survey respondents have been fraud victims on the digital platforms of their respective banks. This suggests that more investments in cyber protection by Banks is required to combat the growing exposure to cyber security risks on digital platforms,” it stated.

It noted that a large percentage of the survey respondents are satisfied with the level of security provided on their respective digital platforms.

“Based on the digital banking satisfaction index’s parameters, Access Bank Plc recorded the highest user experience score of 94.6 underpinned by comparably higher estimated transaction success rates, ease of navigation, and awareness and active usage of services provided. United Bank for Africa Plc (UBA) scored the second highest (94.4) while Guaranty Trust Bank Limited (GTBank) was third with a user experience score of 91.4. Perceived security strength, range of platforms known, and ease of navigation on the platforms were strong ranking factors amongst respondents. Zenith Bank Plc recorded the highest percentage of respondents who perceive their bank’s respective digital platforms to be secure. UBA and Access Bank were the second and third highest respectively,” the survey showed.

The survey also stated that approximately 70 per cent of the survey respondents indicated that they are not willing to switch to another bank’s digital platform.

“This is less than the 82% of respondents recorded in our 2021 survey. Customers cited pain points to be high service fees, poor customer service, frequent downtime on the digital platform and as the main reasons they were willing to make a switch to another bank’s digital banking platform.

“We expect the increasing competition in the digital space from Fintechs and Neo-banks to further spur more innovation and expanded service offerings by banks. Also, given the macroeconomic headwinds, which have reduced the appetite for lending to some extent, we expect more emphasis on non-interest income from electronic banking channels to sustain profitability. Overall, we expect more digital transformation as banks compete to grow and retain market share,” it stated.

Interventions to curb the menace

With over 89 percent of all financial services fraud happening through electronic channels while only 11 percent was non-electronic, the Central Bank of Nigeria has taken a proactive step to spell out new rules on data protection for banks.

To address the menace, the CBN directed banks to secure customers’ explicit consent for the use of their data. Banks are also instituting multiple layers of security measures to secure their customers’ transactions from unauthorized parties.

Banks are also carrying out sensitization campaigns to educate customers on data protection rules and need not to disclose their password to third parties.

The CBN open banking rules require customers to approve requests from banks to share their customers’ data with other competing financial institutions for the purpose of marketing or deployment of digital banking products and services.

Some leading banks like Access Bank Plc, Union Bank Plc, Zenith Bank plc, among others launched dedicated awareness campaigns aimed at sensitizing customers on measures they can take to protect themselves.

The lenders said they have prioritized bank account protection by providing right information to customers for the safety of their transactions.

For instance, the lenders have intensified efforts at educating/encouraging their customers to become more careful and protective of their bank accounts.

Deputy Managing Director, Retail North, at Access Bank, Victor Etuokwu, said there has been a significant increase in the rate of internet-based and technology-perpetrated fraud in recent years.

“We want to ensure that our customers are not only protected but are also aware of the tactics employed by fraudsters.

Access Bank will never request for personal banking information such as your 16-digit card number, password, personal identification number, bank verification number, One-Time Password (OTP). So, customers are also advised to never share this information with anyone even if they claim to be from the bank,” he said.

Etuokwu called on law enforcement agencies to also develop increased expertise in dealing with cybercrime, including operations across national borders.

The Managing Director, Systemspecs Technology Services Limited, Demola Igbalajobi said banks, telcos and switches have roles to play in achieving a seamless and secured payment system for customers.

He said all stakeholders in the payment space should adopt processes and make investments that protect customers’ accounts from e-fraudsters and engender confidence in the payment system.

The NeFF on its part said the introduction of chip-and-pin payment cards have led to a drastic drop in ATM card fraud.

The CBN also instructed banks to set and implement mandatory daily limits for ATM cash withdrawal, while other related transactions, including PoS and web purchases are subjected to stringent limits as agreed and documented between the banks and customers.

Review of Q1 e-payment performance

In spite of the challenges of fraud, transactions through electronic payment (e-payment) channels rose by 30.80per cent to N51.84 trillion in March 2023, from N39.63 trillion recorded in the previous month.

The difference represents N12.21 trillion recorded during the month under review.

The report, which cites e-payment transactions data obtained from the Nigeria Interbank Settlement System, attributed the surge in the total value of e-payment transactions last month, to, “sustained use of digital payment channels despite the waning cash scarcity,” as well as “improved banks’ efficiency.”

“In spite of the challenges of fraud, transactions through electronic payment (e-payment) channels rose by 30.80per cent to N51.84 trillion in March 2023, from N39.63 trillion recorded in the previous month”

Indeed, according to the report put together by Financial Derivatives Company Limited, all e-payment channels recorded an increase in both value and volume of transactions in March, adding that “in April, total value of transactions is likely to rise further due to increased transactions ahead of Easter & Ramadan celebrations.”

Specifically, the report stated that the value of cheque transactions rose by 18.82 per cent to N283.38 billion in March from N238.49 billion in the previous month. It also shows that the Nigeria Interbank Settlement System Electronic Fund Transfer (NEFT) transactions increased by 20.52 per cent to N2.08trillion in March from N1.73trillion in February.

Similarly, the report said that the value of NIBSS Instant Payment (NIP) transactions jumped by 31.37 per cent to N48.33 trillion in March from N36.79 trillion in the previous month.

It further indicates that the value of transactions through Point of Sale terminals surged by 30.41per cent to N1.15trillion in March from N883.45billion in February. Industry watchers believe that the sharp increase in e-payment transactions last month compared to earlier months is an indication that the Central Bank of Nigeria is achieving one of the key objectives of its momentous naira redesign policy-getting more members of the public to embrace-e-payments.

CBN Governor, Godwin Emefiele, had on October 26, announced that the regulator had obtained President Muhammadu Buhari’s approval to change the design of the N200, N500 and N1, 000 denominations.

According to him, apart from helping to tackle problems, such as rising inflation and currency counterfeiting, the naira redesign programme was also aimed at boosting its cashless policy, given that all the infrastructure that is needed to ensure a smooth working cashless system such as the Central Bank Digital Currency (CBDC)- eNaira-, online banking, Payment Service Banks (PSBs), agent banking and mobile banking, had been deployed.

Emefiele, who stated that the new currency notes would become legal tender as from December 15, 2022, said that the old and new notes would circulate concurrently for a period of 45 days up until January 31, 2023, when the former will cease to be legal tender, adding that depositors must deposit the old N200, N500 and N1, 000 banknotes into their bank accounts before the expiration of the deadline.