The Nigerian Inter-Bank Settlement System (NIBSS) is planning to launch an industry-wide anti-fraud system for the financial services industry amid growing concerns over the spate of online fraud, particularly as the country gradually transits from cash to an electronic-based economy.
Banks in Nigeria, Africa’s largest economy by GDP (Gross Domestic Product), have already lost N40 billion to an assortment of online fraud cases in 2013 alone, according to the CBN.
Niyi Ajao, executive director, technology and operations, NIBSS, confirmed the development to BusinessDay at an industry forum in Lagos, saying the system was expected to complement individual banks’ existing anti-fraud solutions.
“Every bank has an anti-fraud system to check fraud patterns and fraudulent transactions. We are adding a new layer of security with this new system. This will enable us reduce electronic fraud to the barest minimum,” Ajao said.
He said the system would focus on inter-bank transactions and alert individual banks of suspicious payment transactions, adding, “It is scheduled to commence live operations in January.”
The system, he said, would put NIBBS in pole position to act as another line of defence for financial institutions against hackers and cybercriminals seeking to exploit possible loopholes in the electronic payment system so as to perpetuate fraud.
“We already have a bird’s eye view of transactions on all electronic channels. So, any fraudulent transaction that a bank’s anti-fraud team misses, we can handle it from here with this system,” he said.
Market observers are of the view that the cashless policy is gaining traction, with the value of the online payments rising exponentially from $314 million in 2010 to $488 million in 2012, according to NIBBS. Local analysts estimate that the total value of online payments hit $630 million as at the end of 2013, in view of rising sales at the main online portals.
With the cashless policy being initiated by the apex bank moving into the second phase, there has been a 10 percent increase monthly in Point of Sale (PoS) transactions, according to NIBBS. The CBN says mobile money has continued to enhance financial inclusion with the number of unbanked public declining from 46.3 percent in 2010 to 37.9 percent in 2013.
As the cashless policy continues to gain traction, market observers have warned banks and other stakeholders in the e-payment industry to step up investments in security of online transactions or risk being overwhelmed by the spate of sophisticated cyber attacks that would soon arise as a result of the sheer volume of online financial transactions. They add that sophisticated online attacks will continue to emerge in view of Nigeria’s steady growth in internet penetration and as critical sectors of the economy (financial services, oil and gas, telecommunications) continually move data into the cyberspace.
The need for more investment in online security becomes even more compelling in the face of absence of appropriate legal framework to prosecute cybercriminals. Nigeria’s constitution in its present form does not define cybercrime.
Meanwhile, the CBN says it does not intend to handle the issue with kids’ gloves, especially in view of the cashless initiative, which seeks to encourage the adoption of electronic payments. Taiwo Longe, chief information officer, CBN, said given that financial institutions, hospitals, telecommunication, corporations and private businesses, etc amass a great deal of confidential information about their customers, employees, products, research findings and financial status, among others, there was a need for maximum security of this information.
“When any of the confidentiality, integrity and availability of data is impacted, security is said to have been breached. There are various threats to information security. Some are very dangerous and disruptive; others are just a nuisance,” he said at an industry forum organised by the office of the national security adviser in Lagos.
He, however, stressed that the fight against cybercrimes and other threats to information security could only be won through the agreement of robust information security policy framework. Noting that the CBN had been engaging banks to comply with some basic global security standards in the management and security of customer information, he stressed that the apex bank, on its part, had complied with such standards.
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