By Onome Amuge.
Digital commerce firm, Interswitch has reported that Nigerian banks suffered a financial loss amounting to N12.2 billion from electronic payment fraud which pervaded the banking industry in the first half of 2023.
The leading African integrated payments and digital commerce platform company also noted that an estimated N35 billion fraud attempts were recorded in 2022, of which N14.3 billion was actually lost.
The worrisome financial loss reflects the burgeoning security issues facing financial institutions in their quest to exploit the digital payment infrastructure to strengthen their financial inclusion drive.
Suzan Fasipe, head of retail payments at Interswitch, provided a critical insight into the daunting state of electronic payment fraud during a presentation at the Techconnect 3.0 event held in Abuja.
The Techconnect 3.0 event, hosted by Interswitch, serves as a platform for robust discussions on financial inclusion strategies and the crucial role of regulators in advancing digital financial inclusion.
Addressing industry players at the annual event, Fasipe disclosed that 58 per cent of fraud losses in 2022 was perpetrated through the mobile, web and POS channels which amounted to N8.3 billion.
She stated further that a concerning 37 per cent of banks had fallen victim to various forms of ransomware attacks between 2021 and the present, while a staggering 93 per cent of banking-related fraud occurred through online transactions.
Fasipe also identified chargeback fraud, which she described as a particularly insidious form of fraud, where consumers manipulate online purchases to their advantage, sometimes going undetected by banks for up to six months.
Interswitch disclosed that this type of fraud, occurs when a customer uses their own credit card to make an online transaction and then asks the issuing bank for a chargeback after obtaining the goods or services.
“When a chargeback is accepted, the financial transaction is cancelled, and the consumer is reimbursed for their money. Depending on the payment method used, the merchant may also be held responsible when a chargeback occurs,” it explained.
According to Fasipe, corporate fraud, largely resulting from weak internal controls, accounted for 96.2 per cent of electronic payment fraud. She added that in 2021,four banks suffered losses of N1.77 billion due to fraudulent activities involving both employees and consumers.
To effectively address the grim statistics presented in the banking sector, Interswitch offered practical recommendations to fortify existing safeguards against fraud, protect sensitive consumer data, and navigate emerging industry trends.
Thomas Eze, Interswitch’s regional head of northern business, emphasised the urgent need to unlock the full potential of mobile payments for a more inclusive economy.
Eze highlighted the profound impact of digital solutions in bridging the financial services divide, particularly in underserved areas, ultimately integrating marginalized communities into the formal economy and boosting economic growth.