Following the adoption of new forms of electronic payment birthed from a cashless policy, which has unquestionably streamlined the payment process for everyone, many incidents of fraud have also been witnessed, along with the number of electronic transactions. In a report titled “Frauds and Forgeries in Nigerian Banks” by the Financial Institutions Training Centre (FITC), the unimaginable side of a cashless society is revealed: 78,584 incidences of fraud were reported by Nigerian banks in just one year. Additionally, over 10,098 Point of Sale (PoS) fraud incidents, totaling N1.95 billion, were reported between the second quarters of 2022 and 2023. As detailed in the report, there were 34,772 cases of computer-based fraud with a total value of N18.97 billion and 33,714 cases of mobile-based fraud with a value of N6.48 billion.
Online fraud has skyrocketed due to electronic payment channel expansion. In the first quarter of 2023, electronic transactions were reported by FITC to have reached N126.73 trillion, up from N87.49 trillion in the first quarter of 2022. This rapid increase is consistent with the CBN goal of cutting out cash transactions and encouraging cashless operations by 2025. It’s undeniable that the widespread adoption of electronic payment systems has altered the way business is done financially. There’s no denying that cashless transactions are more efficient and convenient, but there’s also a downside: the growing risk of online fraud. Online fraud is a rising problem in Nigeria, as the FITC report and other stakeholders have pointed out.
There has been an increase in the number of fraudulent transactions.
As more and more financial transactions move to digital platforms, Ms. Celestina Appeal, Chairperson of the Committee of e-Banking Industry Heads (CeBIH), has estimated that online fraud will become the most prevalent kind of fraud by 2030. More and more purchases are paid for online these days. Electronic banking has gone global. However, there will be dangers when things become increasingly seamless. The criminals are also attempting to broaden their methods. The annual losses in the financial industry total billions. She elaborated that reports from NIBSS indicate that the amount of fraud successfully perpetrated has increased by around four times between 2019 and 2021.
Musa Jimoh, the Director of Payments System at the CBN, stated that the rate of fraud has increased, highlighting the fact that criminals adapt swiftly to new channels and regulatory precautions. Both the frequency and the rate at which fraud occurs have increased. There has been an increase in the number of fraudulent transactions. People will begin to infiltrate a new channel after it has been launched because they will study it. After the CBN has issued a regulation about the payment system, the next step they take is to determine where the loopholes are.
Continuous incidents may discourage the adoption of a cashless economy.
OnePipe’s Head of Engineering, Victor Irechukwu, also expressed concern that Nigeria increasing fraud rate could slow the country’s transition to electronic payment systems. He made the point that people and the country as a whole can be discouraged from adopting cashless economic practices if they have had bad experiences with fraud. Additionally, the Association of Mobile Money and Bank Agents has issued a warning regarding the prevalence of theft and fraud conducted by unauthorised PoS agents. The association President, Victor Olojo, stated that such fraudulent operations have a major impact on the PoS market.
Also, there have been thousands of reported incidences of fraud, costing victims billions of Naira. Therefore, The question this presents is whether the benefits of a cashless society outweigh the potential dangers. In a similar view, a cashless society has several advantages, such as more transparency, less need for physical cash handling, and faster and more efficient financial transactions. It helps more people gain access to financial services and gives businesses an advantage in today’s competitive digital market. In spite of their good intentions, scammers have learned to take advantage of the channels created to simplify everyday life.
Stakeholders in the industry must collaborate to curb the menace.
While striving for a cashless society, it is imperative to prioritise cybersecurity measures, as evidenced by the FITC report on the increase in online fraud cases. In order to effectively prevent fraud, regulators and financial institutions must anticipate new schemes. Keeping up with the ever-changing nature of technology requires ongoing alertness and flexibility. Improving regulatory monitoring, educating consumers, and implementing stricter security systems are all vital to reducing fraud. Financial stakeholders must understand that fraud is happening and collaborate. More so, in 2022, the Lagos State Government issued a Lag ID Card through its Residents Registration Agency to protect Lagosians from PoS fraud.
Related Link
FITC: Website
