Concerns over rising cases of e-fraud
The cash-less banking initiative created by the Central Bank of Nigeria (CBN) to reduce transaction and currency management costs is threatened by fraud and inefficient technology deployed in banks. The policy, billed for national roll-out on July 1, faces severe backlashes from bank customers, reports COLLINS NWEZE
Nothing forewarned Sunday Chukwu, a Mushin, Lagos tyre merchant of the problem he would soon face. That Saturday, a customer bought goods worth N120,000. The customer said he had no cash and requested his account details to transfer the money.
He said: “He typed the number on his phone and within few minutes, I got transaction alert from my bank –First City Monument Bank (FCMB). The alert showed that N120, 000 had been credited to my account. So, he took the goods and went away.
“The next working day, which was Monday, I went to the bank to withdraw the money but it was not there. My account officer showed me my last transaction detail, 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.”
Chukwu released the goods because the 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 told The Nation.
That horrible experience, Chukwu noted, has made him to always insist on taking cash no matter how well he knew the customer. His verdict was that banks are not ready for cash-less banking, which is set for nationwide roll-out on July 1. He said such policies worked in other countries because there is trust and lenders have taken measures to secure their platforms against fraudsters.
But, Head Corporate Communications at FCMB, Louis Ibe, told The Nation that the hitches could have been caused by a network problem. He said such problems exist everywhere, and promised that the lender would find out what happened.
The Managing Director, Park and Carry Limited, Ekwueme Emeka, does not use ATMs because of fear of insecurity.
“I don’t use ATMs. I make my transaction through cheques and withdrawal booklets. It is much quicker and less stressful. Poor network quality remains a major issue that reduces my confidence in e-payment. Sometimes, you go there, slot in your card and nothing comes out but your account is debited,” he said.
Chukwu said the July 1 date for nationwide roll-out should be reconsidered because all parties to the project are not ready. That position came after he lost N120, 000 to fraudsters who bought goods from him and decided to pay through mobile money transfer.
In spite of all the arguments in its favour, some bank customers are equally not comfortable using ATM. Mrs. Olatunji Alima, an egg distributor based in Lagos, is one of such customers. Alima said she has been using ATM since 2012, but does not feel safe with it anymore. “I own a boutique and I am also a sole distributor of eggs. It has been two years now. I don’t feel secure using the device anymore because robbers are attacking ATM subscribers daily at the point of withdrawal. I am always scared of using my ATM cards,” she said. Alima recounted a time when the ATM card simply refused to work.
“There was a time I came to withdraw money to pay off a debt, as I slotted in my card, it refused to neither slip out nor pay me. It was a bad experience. I am always very careful and time conscious every time I am about to make withdrawals from ATM. That is why I do not withdraw in the night. Anytime past 6:00 pm, I don’t get close to the ATM,” she said.
She called for more security on the part of the banks. “I know they are trying their best but they need to do more in terms of security provided for withdrawers and less technical difficulties should be expected,” she advised.
Like Alima, Damilare Oshibajo, a technician, and Jeremiah Amaukwu, an information technology specialist, are also not comfortable using ATM. Oshibajo conceded that though ATM has made banking easier for Nigerians, but regretted that dispensing error is a major challenge. “The other day, I wanted to withdraw N20, 000 from the ATM. The machine debited my account but did not dispense the cash. I was told it will reverse the transaction within 24 hours. It never did until after 21 days,” he said. Amaukwu said there were several times when his account was debited and the money was not dispensed, a situation he described as worrisome. “It was N10, 000 they took from my account. I did not get it back until two months after,” he said.
A cashier at SMAT Electronics, Computer Village, Lagos, Maureen Onyekachi, told The Nation that poor network in the use of e-payment channels and the 1.25 per cent charge on merchants’ accounts when PoS is used have depleted some of the benefits that come with the system. She said the merchant fee wouldn’t have mattered if the network were to be seamless and trusted by customers. She narrated that on several occasions, customers got debit alerts after paying through PoS, but at the merchant’s end, the transactions were declined. Onyekachi said although such hitches were always resolved between the customers and their banks, they create doubts on the feasibility of achieving a viable e-payment system in the country.
“Remember we pay 1.25 per cent fee for every successful transaction done via PoS, which translates to N125 for every N10,000 transaction or N1,250 for every N100,000 transaction. Still, that wouldn’t have mattered if the networks are working well,” she said.
The CBN launched the Cash-less Nigeria Project in Lagos State, in January 2012 and extended the policy to the Federal Capital Territory (FCT), Abia, Anambra, Ogun, Kano and Rivers States in June 2013.
The policy was initiated against the backdrop of cash dominance in the payments system, a development which encouraged the circulation of huge sums of money outside the banking system and imposed huge currency management cost on the economy. The policy was meant to ensure price stability through effective monetary policy; sound financial system and efficient payments system.
It was a critical part of the payment system modernisation, designed to promote the use of Automated Teller Machines (ATMs), Point of Sale (PoS) terminals, web payment, online transfers and even mobile money in banking transactions instead of relying on cash.
CBN Governor Godwin Emefiele, on June 5, removed the three per cent charge on cash deposits above N500, 000 for individuals and N3 million for corporate customers which are the sanction prescribed for defaulters but said the nationwide rollout will hold.
Former CBN Deputy Governor, Operations Tunde Lemo, who oversaw the cashless policy for the first two years after its introduction, admitted that there are challenges with the e-payment system but denied that most of the PoS terminals are not working effectively. He said there are challenges about bandwidth of the telecommunications service providers.
“We spoke to the service providers on the need to improve bandwidth which they did and we saw improvement in the Lagos area. We have started talking to NICOMSAT, and they did a test-run in Lagos area and we are satisfied about their proposition. So within the next few weeks, you will notice improvement in connectivity in Lagos area at least,” he said.
Lemo said some supermarket attendants sabotage the system and tell customers that the PoS is not working because paying through the machine denies them the access to tips or free left over cash of N20 or N40 from customers.
“In one of our meetings with the merchants, we have told them to build-in some reward system that will still allow the attendants access to the free change they get from customers even as tips without compromising the standard of service. When we do that, you will discover that these things work,” he said.
Banking security fears
Such concerns over banking security have put wide embrace of e-payment channels in abeyance. A recent survey by Visa International showed that high net worth account holders neither own nor use ATM cards. The study revealed that people that earn below N500, 000 per annum, which form 47 per cent of its respondents, own and are regular users of debit cards, including for online purchases. It showed that the higher people earn, the less they own and use their debit cards. Majority of the rich, it said, think that avoiding debit cards is the best way to stay protected from online frauds.
Data obtained from the CBN result for 2012 showed the bank received and processed 6,274 complaints, via e-mail on various financial crimes, particularly advance fee fraud. There were 4,527 cases of fraud and forgery involving the sum of N14.8 billion and $1.6 million.
The CBN also received and investigated four complaints against the commercial banks even as the issues were promptly reported to the law enforcement agencies such as the Economic and Financial Crimes Commission (EFCC) for investigation. Globally, estimated credit card fraud stood at $11 billion in 2012, making it one of the most significant criminal developments in modern times.
Nevertheless, Managing Director, Happy Man Magnificent Ventures Limited, Celestine Enemuo, is of the view that Nigeria’s evolving cashless policy is good, but he puts the blame for the present skepticism over electronic-based payment squarely on the shoulders of banks and the CBN. He noted that these institutions have not been able to create the right awareness for the policy. He also lamented the inefficiency associated with the implementation of the policy, adding that fraud and theft are the biggest challenge with the policy.
“Sometimes, the ATMs will send you alert saying, transactions not completed, but you will get alert showing that you have been debitted. And for you to go to your bank to reclaim your money, it will take you time, energy and resources,” he lamented, adding: “But if they can emulate practices in other countries, it will be good.”
He said most Nigerians were not fully aware of the need to keep their passwords secret, and going nationwide will worsen the problem.
“I want the CBN to give more time during which people will be educated, and banks fortify their technology because of challenges that will follow nationwide rollout,” he advised.
Enemuo said customers whose funds were kept by banks because of poor services, should be paid interest on the money.
“I prefer online transactions, but for the security challenge. Again, I have requested for PoS machine from my banks for the past one year from Diamond Bank and Zenith Bank and the banks are yet to supply the device. They said I should wait for them to retrieve PoS from customers who secured them, but are not using them,” he said.
He said these hitches should prompt the CBN to extend the nationwide rollout by one year and monitor banks’ preparatory moves. For him, the real victims of the policy were bank consumers.
How safe are ATMs?
According to experts, Nigerian banks are using an outdated Microsoft Windows operating system, which is vulnerable to hacking, for their operations. This is partly responsible for the frauds associated with their operations. Microsoft Nigeria said 95 per cent of all ATMs which run on Windows XP operating system are vulnerable to hacking. General Manager Microsoft Nigeria, Kabelo Makwane said machines that run on outdated operating systems do not receive security updates are the easiest to hack.
He added that non-migration to the Windows 8 can open the banks up for potential security vulnerability and threats. He said Microsoft stopped issuing security patches and updates for bugs in the Windows XP system from the 8th.
The chairman of the Committee of e-Banking Industry Heads (CeBIH), Chuks Iku, said banks were discussing with Microsoft Nigeria to extend security features in Microsoft XP on ATMs. This followed the expiration of the April 8 deadline set by Microsoft for users of Windows XP to migrate to Windows 8 Operating System (OS).
The National Drug Law Enforcement Agency (NDLEA) had in February, arrested a man with 107 ATM cards at the Murtala Mohammed International Airport in Lagos. The ATM cards were discovered in the man’s luggage during the outward screening of passengers travelling to Istanbul, Turkey aboard Turkish Airlines. It was discovered that the man also had two international passports bearing photographs of him, but with different names.
“He had a Nigerian passport with the name Funsho Oladimeji Babatunde and a Turkish passport with the name Kosar Kursat, both bearing his photographs. The cards found in his luggage are 68 Citi Mastercard cards and 39 Citi Visa cards,” The NDLEA Airport Commander, Mr. Hamza Umar, said.
The agency said the cards were believed to be used for fraudulent purposes, since he was not an authorised agent.
Also, last year, the EFCC arrested two undergraduates for an alleged N2.05 billion fraud at an old generation bank. They allegedly used Oracle’s ‘flexicube’ software to access a bank’s database and fraudulently transferred various sums of money.
Chief Executive Officer, Forenovate Technologies Ltd, Don Okereke said cybercriminals were using skimming and trapping devices to steal credit/debit card details of individuals without such persons knowing. He said there have also been several cases of online account takeover, where an unauthorised party gains access to an existing account by stealing the access codes and conducting illegal funds transfer to a designated account.
“In today’s increasingly connected world, convenience, speed, technology adoption, and payment options allow people and businesses to conduct online financial activities with ease. Fraudsters are taking advantage of this trend, fleecing customers of their funds.
“A leading bank has been bragging of its capacity to open instant bank accounts via Facebook. I advise banks not to sacrifice security and safety of their customers for speed,” he said. Okereke said a large number of bank customers are illiterates who are yet to be accustomed to the dictates of cashless banking and all the issues associated with it.
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