Nigeria’s mobile money sector has witnessed remarkable growth in recent years as millions of Nigerians embrace digital payments for everyday transactions. However, this boom has also attracted the attention of cybercriminals, who exploit the system’s vulnerabilities to defraud unsuspecting users.
According to a report by the Financial Institutions Training Centre (FITC), mobile and Point of Sale (POS) channels saw the highest fraud activities in the first quarter of 2023. The amount involved in mobile fraud increased by 17.85 percent from N938 million to N1.1 billion, while the POS fraud amount involved increased from N241 million to N450 million, representing an 86.73 percent increase.
Mobile fraud also saw the second-highest reported cases in the quarter at 4,982, compared to computer/web fraud which recorded 5,173 cases. The report attributed the rise in fraud cases to the increased adoption of digital payments by Nigerians, especially during the COVID-19 pandemic.
One of the factors that drove the adoption of mobile money was the implementation of the naira redesign policy by the Central Bank of Nigeria (CBN) in November 2022. The policy introduced new banknotes with enhanced security features, reduced sizes, and new limits on cash withdrawals and deposits.
The policy aimed to promote a cashless economy and curb money laundering and inflation. However, it also created a scarcity of cash in circulation, as many Nigerians struggled to exchange their old notes for new ones. This allowed mobile money operators to fill the gap by providing quick access to cash and payment transactions.
Some leading players in the mobile money market include Moniepoint, OPay, and PalmPay, which have millions of agents and merchants nationwide. These companies offer services such as cash withdrawal, deposit, transfer, bill payment, airtime purchase, and e-commerce.
However, these services also expose users to risks such as identity theft, account hacking, phishing, SIM swapping, card cloning, and fraudulent transactions. Many users have complained of losing money from their accounts or being duped by fake agents or merchants.
Some challenges that make mobile money vulnerable to fraud include poor network connectivity, inadequate customer verification, weak security systems, lack of consumer awareness and education, and slow dispute resolution mechanisms.
Experts have suggested possible solutions to address these challenges, such as creating ethical standards, ensuring transparency and accountability, fostering public awareness and education, and collaborating with regulators and law enforcement agencies.
They have also called for a harmonized database of fraudulent individuals across the industry, which could help prevent repeat offenders from accessing financial services. Some fintech companies have reportedly been working on a project called Radar, which aims to create a shared list of suspected criminals using banking and government identity data.
The CBN has also been taking steps to regulate and supervise the mobile money sector, such as issuing licenses to operators, setting operational guidelines and standards, monitoring compliance and performance, and imposing sanctions for violations.
The CBN has also launched its own digital currency called eNaira, which is expected to enhance financial inclusion, reduce transaction costs, improve monetary policy effectiveness, and combat illicit financial flows.
The mobile money sector has undoubtedly brought many benefits to Nigerians, especially those who are unbanked or underbanked. However, it also poses significant challenges that must be addressed urgently to ensure its safety and sustainability. As more Nigerians embrace digital payments, they must be more vigilant and cautious about their financial security.
Source: BusinessDay NG
