Rising cases of digital fraud threaten Nigeria’s financial inclusion goals 

However, a surge in fraud cases threatens to derail this progress, leaving individuals and small businesses increasingly skeptical of digital financial services.

According to recent data by the Financial Institutions Training Centre (FITC), there has been a spike in reported fraud cases by banks and the amount involved in fraud.

Specifically, for Q3 2024, fraud cases reported by Nigerian banks jumped by 65% from 11,532 in Q2 to 19,007 in Q3.

Similarly, there was also a spike in the amount involved in fraud as the attackers attempted to steal N115.9 billion in the third quarter, marking a 105% surge compared with N56.6 billion recorded in Q2.

Going by the FITC Fraud and Forgery reports for the first, second, and third quarters of the year, Nigerian banks and their customers have lost an estimated N53.4 billion to fraud in the first nine months of the year.

For Lagos-based trader Amaka Eze, the promise of convenience turned into a nightmare. She lost N450,000 in July this year after hackers gained access to her mobile wallet through a phishing scheme.

“I had just started trusting digital payments to avoid carrying cash around. Now, I don’t know if I’ll ever use my phone for transactions again,” she lamented

Similarly, Daniel Ajayi, a small-scale farmer in Ibadan, saw his savings wiped out overnight.

“It took me three years to save that N1.5 million, and just like that, it was gone,” said Ajayi, who could not understand how his money was wiped out of his account despite keeping his ATM card and PIN secure.

Stories like theirs have become all too common, eroding trust in digital financial platforms.

The ripple effect of these fraud incidents is profound. Many Nigerians are now hesitant to open bank accounts or adopt fintech solutions, fearing they could lose their hard-earned money.

As part of measures to stem the tide of rising fraud in the financial system, the CBN recently directed all financial institutions in the country to establish fraud desks to help protect against electronic fraud.

The purpose of these desks is to quickly respond to fraud alerts and reduce the number of successful electronic payment frauds.

In addition to that, the apex also set up the National Economic and Financial Crimes Forum (NEFF), a collaborative group led by the CBN that aims to reduce fraud in the Nigerian financial system.

The NEFF’s functions include:

The NEFF’s functions include:

Despite the regulatory efforts, the issue of fraud still remains a major challenge in the financial industry and a threat to financial inclusion.

However, a cybersecurity expert and Unity Bank’s Chief Information Security Officer (CISO), Mr. Zechariah Akinpelu, noted that some of the losses to fraud are caused by bank customers’ carelessness.

“If someone gets hold of your card details, they can make transactions on your behalf without needing your PIN,” he warned.

Highlighting the global risks, Akinpelu noted that while Nigerian banks have implemented robust security measures, such as PIN and chip technology, the global nature of online shopping exposes Nigerians to vulnerabilities present in other regions.

“In Nigeria, you can feel secure that most merchant sites will require a PIN for transactions. However, we live in a global village. I can order a phone from anywhere and have it delivered to me within a few days,” he said.

The Unity Bank CISO expressed worry that many Nigerian cardholders care less about the numbers on their cards but only their PIN.

“The way people carelessly handle their cards these days is concerning. People think that because they protect their cards with a PIN, even if the card gets lost, they are protected,” he stated.

Aside from the need for more awareness for bank customers to be security conscious with their ATM cards and other bank details, stakeholders in the financial industry said the financial institutions still have a lot to do in restoring the people’s confidence in them.

While expressing concern that the increasing rate of fraud across banks is eroding trust in the financial sector, the Managing Director and CEO of the FITC, Dr, Chizor Malize, suggested the deployment of Artificial Intelligence by all financial institutions to tackle the problem.

According to her, emerging technologies like AI would play a critical role in combating the rise of cyber threats and digital risks, which have been exacerbated by advancements in technology.

“There is an urgent need for leveraging AI to mitigate risks and bolster the stability of the financial system,” she said.

Emphasising the need for collaboration among banks to tackle the menace, Femi-Oyewole said:

“We can compete on models, we can compete on strategies, on objectives and all that. When it comes to cyber security, we are all faced with the same common enemy. So, that means we have to collaborate.” 

Similarly, the MD/CEO of Pattison Consulting Limited, Mr. Pattison Boleigha, advocated for the wider adoption of AI tools and software to counter financial fraud.