Over the past five years, there has been considerable growth in electronic payment platforms in Nigeria. This payment ecosystem has introduced a new level of convenience for customers and in most cases, a pickup in patronage for retailers. However, these electronic payment options are exposed to electronic fraud. The latest annual Nigeria Electronic Fraud Forum (NeFF) report from the CBN captures views from DMBs in 2016. According to the report, the banking services industry was able to block 49.7% of total attempted fraud within the system last year.
There was a sharp increase of 82% y/y in attempted fraud cases in 2016. However, a marginal decline of 3% y/y was recorded in actual losses due to fraud, which stood at N2.1bn (US$5.7m).
The report suggests that the increase in fraudulent activities mirrors the country’s economic downturn. Technically, the recession kicked in last year. To put this in context, the macro challenges have resulted in job losses and a squeeze in household pockets which could encourage e-fraud.
Automated teller machines (ATM) recorded the highest volume (49.5%) of total fraud while mobile platforms were the second largest, accounting for 19.9% (see chart below).
Based on CBN data, there were 1,020 beneficiaries of e-fraud transactions. However, only 21% were placed on the Nigeria Inter-Bank Settlement System watch-list as the system is yet to receive bank verification numbers for the remaining 79% from specific commercial banks. This delay is hindering the sweep out of fraudsters within the system.
We expect robust growth in e-payments. On a macro note, it bodes well for public financial transparency and by extension fiscal revenue. However, cyber security needs to remain a priority to encourage patronage of electronic payment platforms.