Nigerian Banks And Fintech Firms Unite to Combat The Surging Fraud Rates, Seek Approval From CBN
In response to the increasing incidents of fraud causing substantial financial losses, Nigerian banks and fintech companies are in discussions for a collaborative effort to combat fraud, according to a senior executive at a Nigerian bank.
The proposed solution arising from these discussions is anticipated to be presented to the Central Bank of Nigeria for approval by the end of Q1 2024.
While two fintech founders acknowledge awareness of the ongoing conversations, they note that there is still progress to be made in finding common ground between banks and fintechs.
The proposed industry-wide collaboration aims to establish a solution that holds all financial institutions accountable for fraud. Special attention may be given to Bureau de Change operators and banking agents, often utilized by fraudsters after successfully withdrawing stolen funds, according to an insider familiar with the discussions.
Data from the Financial Institutions Training Centre (FITC) reveals that deposit banks incurred losses of ₦9.75 billion due to fraud in Q2 2023, marking a significant 276% increase compared to the same period in 2022. The total losses from fraud incidents amounted to ₦5.79 billion in Q2 2023.
In response to the rising fraud, the Central Bank of Nigeria has been actively seeking solutions. Since 2015, the regulator mandated financial entities to establish fraud desks, emphasizing their effectiveness in responding to fraud alerts promptly. The CBN has also imposed fines on banks and fintech firms found to have relaxed Know Your Customer (KYC) rules.
Despite these efforts, some industry stakeholders argue that collaborative solutions have not translated into effective policies, with a historical lack of shared responsibility and a preference for working in silos. Previous attempts to unite operators by organizations like CBN, CeBIH, NFIU, and NSA have seen limited implementation.
Financial institutions may continue to address the issue individually, with concerns arising from the difficulty in obtaining refunds when fraud involves a fintech, compared to banks that tend to refund to avoid public embarrassment and reputational damage.
An industry leader suggests a layered system where older customers with proven identities and transaction history receive instant value, while newer customers experience delayed value, allowing time for complaints and actions to be taken in case of fraud.
