Nigeria looses more than 1billion naira to POS fraud in just one year

There is no denying that the popularity of electronic payment methods has simplified the payment process for consumers worldwide. However, as the number of electronic transactions increases, online fraud is on the rise.

Nigerian banks recorded a startling 78,584 incidences of fraud in a single year, according to a recent report by the Financial Institutions Training Centre (FITC) on “Frauds and Forgeries in Nigerian Banks,” exposing the negative aspects of a cashless society.

Additionally, over 10,098 fraud incidents involving a total of N1.95 billion in PoS transactions were reported between the second quarters of 2022 and 2023. The study also revealed 33,714 mobile-based fraud instances and 34,772 computer-based fraud cases, totaling N6.48 billion and N18.97 billion, respectively.

The exponential increase of electronic payment channels is the primary cause of the rise in online fraud. In the first quarter of 2023, FITC recorded a startling 44.84% growth in electronic transactions, hitting N126.73 trillion compared to N87.49 trillion in the corresponding period of 2022. The Central Bank of Nigeria’s (CBN) goal of eliminating cash transactions by 2025 and favoring the usage of cashless terminals is in line with this exponential expansion.

Weighing the benefits and dangers of a cashless society

Our approach to financial transactions has surely changed as electronic payment options become more common. There is no denying the efficiency and convenience of cashless transactions, but there is a catch: the growing danger of online fraud. Nigeria is dealing with a growing threat in the form of online fraud, as several stakeholders and the FITC report have underlined.

By 2030, as more transactions move to digital platforms, Ms Celestina Appeal, Chairperson of the Committee of e-Banking Industry Heads (CeBIH), predicted that online fraud may overtake all other types of fraud.

“Today, internet payments account for a growing portion of sales. Globalization has impacted e-banking. However, there will be dangers as things grow more seamless. The scammers are also attempting to diversify their tactics. The financial industry experiences annual losses in the billions. The amount of successfully committed fraud has climbed by roughly four times between 2019 and 2021, according to NIBSS figures, she said.

The CBN’s Director of Payments Systems, Musa Jimoh, stated that the fraud rate had increased and pointed out that scammers swiftly adjust to new channels and regulatory safeguards.

“Fraud has really increased in frequency and prevalence. There are more frauds being committed. People start to penetrate once you open a new channel, analyse it, and use it. The next step after the CBN releases a regulation pertaining to the payments system is to identify any compromises.

Director of the CBN’s Payments System, Musa Jimoh.

The adoption of e-payment platforms in Nigeria may be hampered by the increased rate of fraud, according to Victor Irechukwu, Head of Engineering at OnePipe. He made the point that negative experiences brought on by fraud events can discourage people and the nation at large from adopting a cashless economy.

The theft and fraud that frequently takes place through PoS terminals and is conducted by unregistered PoS agents has also been brought up by the Association of Mobile Money and Bank Agents in Nigeria. The association’s president, Victor Olojo, stated that these fraudulent practices have a big impact on the PoS sector.

What is attainable?

The statistics are concerning, with thousands of fraud cases being reported and losses totaling billions of Naira. This begs the urgent question: Are the dangers associated with a cashless society worth the convenience it offers?

The solution is not simple. On the other hand, a cashless society has several advantages, such as more transparency, less handling of actual cash, and increased financial transaction efficiency. It encourages financial inclusion and gives businesses chances to prosper in a connected digital economy. The unsettling reality is that fraudsters have learned to take advantage of the very channels intended to make our lives easier.

In our goal for a cashless society, the FITC report on the rise in online fraud cases in Nigeria serves as a sharp reminder of the necessity to emphasize cybersecurity. Electronic payments have unquestionable advantages, but they also have inherent risks that must be disregarded.

In order to combat fraud, regulators and financial institutions must always be one step ahead. Technology is developing quickly, thus it requires ongoing attention and adaptability. To reduce fraud, it is crucial to implement strict security measures, educate consumers, and strengthen regulatory monitoring.

Stakeholders in the financial sector must also understand that the fight against fraud is never-ending. Criminals will discover new vulnerabilities as more transactions go online. Therefore, cooperation between business stakeholders, law enforcement, and governmental organizations is essential to thwarting fraudsters.

The Lagos State Government took measures in 2022 to reduce the operations of fraudulent PoS players in response to the rising number of PoS frauds. To protect Lagosians from the rising instances of PoS fraud, it announced plans to issue a Lag ID Card through its Residents Registration Agency.

Author

Samson Ayodeji

I am literally obsessed with technology. I love writing about the latest news in technology in different markets, segments and sectors across the world.

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