2014 e-payment fraud landscape in nigeria · pdf file2014 e-payment fraud ... there is a huge...

2014 E-PAYMENT FRAUD LANDSCAPE

IN NIGERIA

2014

A summary and analysis of reported e-payment frauds.

TABLE OF CONTENTS

NIBSS 2015 www.nibss-plc.com.ng

Contents

Overview _________________________________________________________________________________________________ 1

2014 Transactions at a Glance __________________________________________________________________________ 2

2014 Fraud at a Glance __________________________________________________________________________________ 5

Returned Cheques 2014 ________________________________________________________________________________ 11

Fraud Trends ____________________________________________________________________________________________ 13

Fraud Outlook for 2015 ________________________________________________________________________________ 16

Table of Figures

Figure 1 2014 NIBSS Transactions Volume and Value ..............................................................................................

Figure 2 Transactions by year 2013 against 2014 .................................................................................................. 3

Figure 3 Electronic Transactions vs Non-Electronic Transaction ...................................................................... 4

Figure 4 Transaction Growth Monthly ......................................................................................................................... 4

Figure 5 Attempted Fraud vs Actual Loss ................................................................................................................... 5

Figure 6 Fraud by Channels 2014 .................................................................................................................................. 6

Figure 7 Fraud by Channels 2013 .................................................................................................................................. 7

Figure 8 Fraud reported by month 2014 ..................................................................................................................... 8

Figure 9 Fraud reported by month 2013 ..................................................................................................................... 8

Figure 10 Quarter by Quarter Fraud Value and Volume 2014 ............................................................................ 9

Figure 11 Returned Cheques against Presented Cheques Volume and Value .............................................. 11

OVERVIEW

Page 1 NIBSS 2015 www.nibss-plc.com.ng

Overview

Globally fraud is on the rise as well as its sophistication. In Nigeria, over the years most of

these incidents have gone unreported. However, in 2013 under the directive of the CBN

(Central Bank of Nigeria), NIBSS (Nigeria Interbank Settlement System Plc) developed the

Anti-Fraud Portal with a view of getting the Banks to report their e-payment frauds as it

occurs. In this report, the InfoSec (Information System Security) department of NIBSS

shows the analysis of the reported frauds to detect and show the trends of e-payment

frauds in Nigeria.

This report is focused on informing and helping the public understand payment fraud

issues. The aggregated data will also inform consumers and businesses on how fraud

occurs using various channels, as well as aid financial institutions with more effective fraud

trend monitoring and preventive measures to combat the fraud.

Fraud in the Nigerian payments system and also on a global scale has been on the increase

over the past few years as technological advances impact on the way we pay. Internet

banking, the ever increasing use of the ATMs and other electronic platforms have one way

or the other accelerated the growth of fraudulent activities. Cheques and over-the-counter

fraud has given more room to a sophisticated and more concise electronic type of fraud.

In Nigeria, Internet banking and ATM scored as the lead channels for perpetuating e-fraud

in 2014.

N.B: Internet banking and ATM scored as the lead channels for perpetuating fraud in 2014

as it recorded the highest value lost to fraudulent activities.

2014 TRANSACTIONS AT A GLANCE


2014 Transactions at a Glance

TRANSACTION VOLUME AND VALUE

Across all payment channels in the financial industry; including electronic and non-electronic

based platform, Nigeria has experienced a massive rise in the volume and value of transactions

processed yearly.

Year End Volume Value

2013 74,059,575 34,191,968,951,140

2014 113,421,933 43,857,678,478,941

% Change 53% Increase 28% Increase

Table 1 Total transaction volume and value processed by the NCS (Nigeria Central Switch)

In the year 2014, the Central Switch (NIBSS) alone processed over 100million transactions in terms

of volume with a corresponding value of over NGN 40 Trillion (over USD 208 Billion). Furthermore,

the volume of transactions grew by over 50% between 2013 and 2014 with its value also growing

by 28%.

TRANSACTION BY PRODUCTS

NIP (NIBSS Instant Payment), which is an instant account2account payment platform accounted

for most of the transactions in the year in terms of value and volume followed closely by NEFT

(NIBSS Electronic Funds Transfer), which is a clearing house based payment platform. It is

important to note that though POS had a significant volume it accounted for little in terms of value

as POS transactions are largely used for small scale transactions.

21.70%

37.51%

26.63%

14.17%

2014 Volume

POS

NIP

NEFT

1.02%

48.22%

33.14%

17.61%

2014 Value

Figure 1 2014 NIBSS Transactions Volume and Value



In comparison to 2013, the Central Switch experienced a massive increase in Instant Payment and

POS transactions in terms of volume and value. Cheques and clearing baseed transactions

witnessed little increase. This might be attributed to the fact that there is massive shift from

clearing based transfers which occurs in cycles of about 4 hours to instant payments.

Figure 2 Transactions by year 2013 against 2014

Volume 2013 Volume 2014 Value 2013 Value 2014

POS 11,258,846 24,607,497 229,903,237,909 447,459,739,698

Instant Payments 17,967,646 42,540,034 11,674,496,434,771 21,148,614,937,311

EFTs 30,134,545 30,203,908 14,218,018,800,813 14,536,388,062,398

CHEQUE 14,698,538 16,070,494 8,069,550,477,646 7,725,215,739,533

TOTAL 74,059,575 113,421,933 34,191,968,951,139 43,857,678,478,940 Table 2 Transaction volume and value (2013 & 2014) processed by NCS categorized by Payment types

ELECTRONIC PAYMENTS LEAD THE WAY

According to spooled data, analysis showed that the general public make more use of their cards

across electronic platforms which includes ATMs, Internet Banking, Mobile Banking, ecommerce

amongst others. The increased use of electronic platforms for payments has played a significant

role in the increased number of transaction volume and value in the past few years. In the year

2014, transactions processed by the Central Switch through electronic platforms (i.e non-cheques)

accounted for 86% of the overall transactions in terms of volume and 82% in terms of value which

is an increase over the year 2013 by 6% in both transaction volume and value.

As the trend shows, more people are adopting the use of electronic payments systems i.e. going the

cashless direction.

05

1015202530354045

POS InstantPayment

EFTs Cheque

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Volume 2013 Volume 2014

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EFTs ChequeT

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Value 2013 Value 2014



Figure 3 Electronic Transactions vs Non-Electronic Transaction

TRANSACTIONS MONTHLY

As shown in the graph below there was a consistent increase in transaction volume and value with

slight dips in May and September 2014. Same can also be said retrospectively for the year 2013.

Figure 4 Transaction Growth Monthly

There was also a steady increase in transaction volume towards the last quarter of the year 2014.

-20%

0%

20%

40%

60%

80%

Volume Value

Percentage Change between Use of Platforms

Electronic Non-Electronic

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Transaction Growth 2013 vs 2014

Volume 2013 Volume 2014 Value 2013 Value 2014

80

%

86

%

76

%

82

%

2 0 1 3 2 0 1 4

Electronic

Volume Value

2014 FRAUD AT A GLANCE


2014 Fraud at a Glance

FRAUD BY VOLUME AND VALUE

Technology is great, except for all the security risks involved in its usage. Companies must keep

pace with technology to grow their businesses, but they also face greater threats associated with

increased use of these technologies. Organizations’ reputations can be dented faster than ever

thanks to the viral nature of social media. There is a huge rise in Across the Counter fraud and

internet banking fraud as the nation grows in use of mobile banking, ATMs, e-Commerce, POS,

cloud computing and social media.

Year End Fraud Volume

Reported Attempted Fraud

Value Reported Actual Loss Value

Reported

2013 822 19,148,787,069 485,194,350

2014 1,461 7,750,152,748 6,215,987,323

Table 3 Total fraud volume, attempted fraud value and actual loss value across all channels on the NCS

The above table depicts that more fraud occurred in 2014 and more loss was recorded in terms of

value compared to the attempted fraud value.

Figure 5 Attempted Fraud vs Actual Loss

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2013 2014

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FRAUD BY CHANNELS

In the year 2014, ATM machines were the major victims of fraudulent activities in terms of volume

as it experienced the highest number of fraudulent transactions. However, as shown in the chart

below, internet banking actually accounted for a loss of about NGN 3.2 billion to fraudulent

transactions in terms of value.

Figure 6 Fraud by Channels 2014

Payment Channels

Attempted Volume

Across Counter 153

Internet Banking 287

e-commerce 114

POS 166

Cheques 11

Web 218

ATM 491

Mobile 21

Total 1,461

Table 4 2014 Fraud Volume by Channels

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2014 Fraud By Channel

Volume Attempted Value



As for 2013, there were quite a substantial amount fraudulent transactions in terms of volume on Internet banking and Web based transactions. Also, Across the Counter accounted for almost NGN16 billion of the attempted fraud which is the bulk of fraud witnessed in 2013.

Figure 7 Fraud by Channels 2013

FRAUD BY PLATFORM

In this report, NIBSS has categorized the various channels into Electronic and Non-Electronic

platforms. The tables below show a list of all the identified payment channels and fraud

volume for 2014 on those channels as identified by NIBBS existing in the Nigerian financial

industry. Further categorizing them into electronic and non-electronic platforms:

NB: Web: Purchases made on the

internet but not on merchant’s

site

E-Commerce: Purchases made on

the internet on the merchant’s

site

Table 5 Reported fraud volume by channels categorized into Electronic and Non-Electronic platforms.

- 20 40 60 80

100 120 140 160 180

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2013 Fraud By Channels

Volume Attempted Value

Electronic Platforms Volume

Internet Banking 287

e-commerce 114

POS 166

Web 218

ATM 491

Mobile 21

Total 1,297

Non-Electronic Platforms

Volume

Across Counter 153

Cheques 11

Total 164

Channel Attempted

Volume

Across Counter

73

ATM 147

Cheques 15

eCommerce 78

Internet Banking

287

Mobile 8

POS 2

Web 212

Total 822

Table 5 2013 Fraud Volume by Channels



FRAUD BY MONTH

The chart below depicts the rise in fraud events for the year 2014 showing the last quarter of the year as the period with the highest volume fraudulent activity up to 11 million NGN. This might be as a result to the high rate of transaction during this period.

Figure 8 Fraud reported by month 2014

Similar to 2014, 2013 also had November as its peak in terms of value with the most frauds

occurring in July.

Figure 9 Fraud reported by month 2013

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2014 Fraud by Month

Volume Value

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2013 Fraud by Month

Value Volume



FRAUD BY QUARTER

In 2014 attempted fraud value as well as actual loss value suddenly spiked after the second quarter

and hit its peak in the third quarter. However, it took a slight dip in the last quarter of 2014. This is

depicted in the chart below.

Figure 10 Quarter by Quarter Fraud Value and Volume 2014

However, there was not much loss in the first quarter of the year as compared to the sudden spike

experienced from the second quarter and even increased at the last quarter of the year up to 97%

in terms of actual loss value as against attempted fraud value.

Quarters Volume Attempted Value Actual Loss Value

% Actual Loss

Value in

Attempted

Fraud Value

1st quarter 336 1,003,124,742 172,920,263 17%

2nd quarter 298 523,849,238 441,714,718 84%

3rd quarter 366 3,708,992,359 3,170,221,230 85%

4th quarter 461 2,514,186,408 2,431,131,110 97%

TOTAL 1,461 7,750,152,747 6,215,987,321

0.0

0.5

1.0

1.5

2.0

2.5

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3.5

4.0

1st quarter 2nd quarter 3rd quarter 4th quarter

VA

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Attempted Value Actual Loss Value

Table 6 Reported fraud volume, attempted value and actual loss value for 2014 broken down by quarters



SUSPECT APPREHENSION RATE

In 2014, as part of the investigation process, a number of suspects and criminals were apprehended

after fraud had been report. Although, the figures shows that more work needs to be done to

improve apprehension rate. However, the low number is due to some constraints like the law/legal

context that isn’t clearly defined when it comes to financial and cyber-crimes carried out using

electronic platforms. A major issue is the collaboration of the law enforcement agents and the

financial industry.

Apprehended Volume Value

YES 41 899,263,953

NO 1420 6,850,888,796

Table 7 Number of apprehended suspects as against the total fraud volume and value reported

RETURNED CHEQUES 2014


Returned Cheques 2014

The chart below shows 2014 cheque transactions. Cheque volume as well as value increased over

the months in the year. Returned cheques increased in both volume and value when compared to

2013.

Figure 11 Returned Cheques against Presented Cheques Volume and Value

0

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Presented Returned Accepted

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Presented Returned Accepted

RETURNED CHEQUES 2014


Month

Cheque Presentme-nt Volume

Cheque Returned Volume

% Return Rate(Vol)

Cheque Presentment Value

Cheque Return Value

% Return Rate(Val)

14-Jan 1,235,071 39,942 3.23% 634,346,591,980 28,634,266,684 4.51%

14-Feb 1,142,608 36,744 3.22% 620,617,590,664 27,098,278,144 4.37%

14-Mar 1,136,109 40,696 3.58% 639,105,966,874 29,454,994,304 4.61%

14-Apr 1,134,526 45,751 4.03% 618,875,998,640 29,799,713,539 4.82%

14-May 1,198,645 42,727 3.56% 603,581,587,487 28,960,773,036 4.80%

15-Jun 1,297,381 43,306 3.34% 594,145,267,272 29,832,506,506 5.02%

15-Jul 1,484,390 49,828 3.36% 598,737,249,909 33,868,086,338 5.66%

15-Aug 1,476,465 42,627 2.89% 577,436,511,115 29,589,026,135 5.12%

15-Sep 1,348,320 42,835 3.18% 595,489,695,422 30,181,916,649 5.07%

15-Oct 1,372,534 51,046 3.72% 576,832,562,705 31,887,330,113 5.53%

15-Nov 1,401,839 51,928 3.70% 643,734,510,254 36,848,833,011 5.72%

15-Dec 1,286,236 68,940 5.36% 644,845,309,289 41,311,173,463 6.41%

Total 15,514,124 556,370 3.59% 7,347,748,841,612 377,466,897,921 5.14%

Table 8 Percentage Return Rate

FRAUD TRENDS


Fraud Trends

TRENDS BY VOLUME AND VALUE

Taking polls from our last two years fraud data, there was a significant rise of up to 78% in the

volume of fraudulent cases in 2014. Although the value of the attempted fraudulent transactions

reduced, there was a huge increase in the moneys that were actually lost to fraudsters. Further

analysis showed that the percentage of Actual Loss Value as against Attempted Fraud value

increased by up to 77% from 3% to 80% within one calendar year. This helps to emphasize the

need for more security measures in handling payment cards as individuals, and improved security

practices as corporate bodies to help minimize fraud rates.

TRENDS BY CHANNELS

There was a paradigm shift between 2013 and 2014 in terms of fraud volume and value by

channels. POS, ATMs, Mobile banking and Across the Counter witnessed the highest rise in terms

of transaction volume in the year 2014. Although Across the Counter witnessed over a 100%

increase in fraud volume, the other channels are electronically based.

Channel Volume 2013 Volume 2014 % Change

POS 2 166 8200%

ATM 147 491 234%

Mobile 8 21 163%

Across Counter 73 153 110%

eCommerce 78 114 46%

Web 212 218 3%

Internet Banking 287 287 0%

Cheques 15 11 -27%

Total 807 1461

Table 10 Fraud volume trend by channels in terms of percentage change between 2013 and 2014

Year End Fraud Volume Attempted

Fraud Value Actual Loss

Value

% Actual Loss Value in

Attempted Fraud Value

2013 855 19,148,787,069 485,194,350 3%

2014 1,461 7,750,152,748 6,215,987,323 80%

% Change 78% -60% 1181% 77%

Table 9 Total fraud trend in terms of percentage change between 2013 and 2014

FRAUD TRENDS


The current trend that was witnessed in 2014 in terms of actual loss value to fraud was consistently

on the rise across all the channels except Cheques. From the table below, it shows that 2014 was a

less secure year in terms of success rate at intercepting/preventing fraudulent transactions.

Channel Actual Loss Amount

2013 Actual Loss Amount

2014 % Change

ATM 54,999,829 2,688,669,292 4789%

POS 5,851,443 157,610,831 2594%

Across Counter 13,851,780 140,813,927 917%

Web 109,298,898 1,031,239,284 844%

Internet Banking 271,762,696 2,120,881,512 680%

ecommerce 13,948,390 58,994,920 323%

Mobile 6,787,544 13,328,957 96%

Cheques 8,693,770 4,448,600 -49%

Total 485,194,350 6,215,987,323

Table 11 Fraud actual loss amount trend by channels in terms of percentage change between 2013 and 2014

FRAUD TRENDS


FRAUD RATE

2014 was quite alarming in terms of fraud as it recorded very high volume and value of fraudulent

transactions in Nigeria (Note that we suspect that the actual volumes and values are usually way

higher than reported). However, fraudulent transactions (attempted fraud value) as a percentage

of the total transactions value for 2014 was less than 1%. This generally shows that transactions

are highly secure but the success rate at which attempted fraudulent transactions are successful is

equally high up to 80% in 2014 as against 3% in 2013.

Year End Attempted

Fraud Value Actual Loss

Value % Change

2013 19,148,787,069 485,194,350 3%

2014 7,750,152,748 6,215,987,323 80%

Table 12 Actual loss value as a percentage of attempted fraud value in 2013 and 2014

Transaction Volume Fraud Volume Fraud Rate

187,481,508 2,283 0.001%

Table 13 Total 2013 & 2014 Fraud Volume as a percentage of total 2013 & 2014 Transaction Volume on NCS

NB: The fraud figures are what is reported across the industry, while the transaction figures are only the ones that were processed by the Nigerian Central Switch.

Transaction Value Attempted Fraud

Value Fraud Rate

78,049,647,430,082 26,898,939,817 0.034%

Table 14 Total 2013 & 2014 Attempted Fraud Value as a percentage of total 2013 & 2014 Transaction Value on NCS

FRAUD OUTLOOK FOR 2015


Fraud Outlook for 2015

The advent of the fraud scene in 2014 which was a rollercoaster ride for all holders of critical

intellectual and financial property all over the world and in Nigeria, 2015 must not be

underestimated. Here at NIBSS, we give a concise look towards the future on possible trends and

events that might potentially occur in the fraud scene in Nigeria.

Culled from Deloitte’s Nigeria Cyber Security Outlook 2015 bulletin, some of the following have

been identified as major highlights that we might experience as 2015 unfolds.

POTENTIAL FRAUD TRENDS

Phishing and Insider threat would most likely be on the rise as the fuel and crude oil prices

continue to deteriorate. We would most likely experience a rise in the number of disgruntled

employees and also from outside of the job market. Hence, an increase in the number of targeted

phishing attacks to acquire sensitive data.

Socially and Politically motivated cyber-attacks as the elections are held. Unhappy citizens and

other groups might use this as a medium to target websites and IT infrastructure of government

bodies and agencies as a means to make their voices heard. Already, the Nigeria Army website have

been allegedly reported hacked. AIT, a foremost television station in Nigeria has alleged that its poll

website was hacked too. The aftermath of the elections may escalate such hacking activities.

POTENTIAL MITIGATIONS

There is the introduction of the biometrics project which is also known as Bank Verification

Number. It is a number used for proper customer identification, and can be used as verification at

the point of Banking operations. It refers to identification of an individual based on physiological

attributes- fingerprint and facial features. This centralized biometric system was launched by CBN

in collaboration with all Nigerian banks. This initiative is expected to solve the age long problem

of proper identity in the banking sector. We believe that once the BVN is made mandatory, e-

payment and Bank frauds would reduce by about 60%. It is being hoped that the BVN would be

made mandatory before the end of 2015.

From 2014, the Federal Government of Nigeria, CBN and major players in the financial industry

took steps to better improve security measures in the country. In terms of legal aspect to improve

prosecution, the National Assembly in collaboration with the Senate passed a Cybercrime Bill. This

bill spells out punishment for e-crimes that were hitherto not deemed as crimes before. We believe

this would serve as deterrents to fraudsters. However, if the bill is not signed into law by the

FRAUD OUTLOOK FOR 2015


president before the expiration of the tenure on May 29th 2015, the Cyber-crime bill would have to

start its process all over again from the beginning.

CBN passed a mandate for all financial institutions to adopt worldwide acceptable standard to

improve Information Security with the likes of ISO 27001 and COBIT 5. Also, they mandated all

card processing and handling companies to adopt PCI/DSS. Going forward this would help reduce

fraud in the payment card industry.

As 2015 continues to unfold, the Nigerian financial industry has gone a step ahead to introduce an

industry-wide, central Anti-Fraud solution, Heimdall to further combat against the fraud rates that

has been ever growing. Heimdall will tackle the currently rising inter-bank fraud rate in the system

as it will monitor inter-bank transactions real-time 24/7, help in the report of fraud as it occurs

thus curbing the viral spread of fraudulent transaction in the days ahead. Going forward, we might

also witness a rise in the prosecution of cyber related crimes and more accountability on senior

level executives of institutions when security breaches occur.

A more sustained and targeted bank-users education would be required in 2015 to ensure bank

customers are not defrauded through social engineering methods.

2014 e-payment fraud landscape in nigeria · pdf file2014 e-payment fraud ... there is a huge...

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