Addressing Escalating Fraud Challenges: Nigerian Banks and Fintech Firms in Talks for Collaborative Industry Solution

As instances of fraud in Nigeria’s financial landscape continue to escalate, high-ranking executives from Nigerian banks and fintech companies are engaged in discussions to form an industry-wide collaboration to combat fraudulent activities, potentially presenting a joint proposal to the Central Bank of Nigeria for approval by the end of the first quarter of 2024.

Seeking Common Ground: Fintech Founders Acknowledge Talks but Emphasize the Need for Further Alignment

While two fintech founders confirm awareness of the ongoing conversations, they note that finding common ground between traditional banks and fintech entities remains a work in progress.

Holistic Solution to Combat Fraud: Collaboration Aims to Hold All Financial Institutions Accountable

The proposed collaboration seeks to establish a solution that holds all financial institutions accountable for fraud.

Specific attention may be directed towards Bureau de Change operators and banking agents, often utilized by fraudsters to process stolen funds.

Alarming Rise in Fraud Incidents: Financial Institutions Face Billions in Losses

Data from the Financial Institutions Training Centre (FITC) reveals a significant surge in fraud-related losses, with deposit banks losing ₦9.75 billion to fraud in Q2 2023, marking a staggering 276% increase from the same period in 2022.

The total losses from fraud incidents amounted to ₦5.79 billion in Q2 2023.

CBN’s Efforts and Industry Reactions: Struggling to Translate Policies into Shared Responsibility

As fraud incidents surge, the Central Bank of Nigeria (CBN) has imposed fines on banks and fintech companies for lax Know Your Customer (KYC) rules.

However, industry insiders argue that these efforts have not translated into policies fostering shared responsibility and creating circuit breakers in the system.

Challenges in Prior Collaborative Efforts: Low Trust Environment and Siloed Approaches

Previous attempts by banks and fintech companies to collaborate have faced challenges due to a low-trust environment and a preference for building solutions in silos.

Efforts by regulatory bodies to unite operators have also yielded limited results.

Individual Problem-Solving Continues: Banks Wary of Fintech Involvement in Fraud Incidents

Some banks express concerns about involving fintechs in fraud incidents, emphasizing the difficulty of obtaining refunds when fraud involves a fintech platform.

Banks, however, tend to refund customers to avoid public embarrassment and reputational damage.

Layered System Proposal: A Potential Solution Recommended by Stakeholders

Stakeholders suggest implementing a layered system where older customers with established identities and transaction histories receive instant value.

In contrast, newer customers experience delayed value, allowing time for complaints and necessary actions in case of fraudulent activities.

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