In Nigeria, the landscape of financial transactions is rapidly changing with the widespread adoption of digital payments, particularly through Point of Sale (PoS) systems. However, amidst the convenience and accessibility offered by these systems, a dark shadow looms over the country’s financial sector – PoS fraud.
In the bustling streets of Lagos, Abuja, and beyond, the clinking of coins and rustle of banknotes are slowly being replaced by the beeps of PoS machines. For many Nigerians, these devices represent progress, offering a quick and efficient way to conduct transactions without the need for physical cash.
But behind the veneer of convenience lies a troubling reality. According to data from the Financial Institutions Training Centre (FITC), PoS fraud cases have been on the rise, with over 10,000 reported cases in the span of just one year. The total amount lost to fraudsters? A staggering N1.9 billion.
“I couldn’t believe it,” said Chioma, a trader in Ikeja, recounting how she lost thousands of Naira after a fraudulent transaction was made on her PoS machine. “I thought I was being careful, but they still got me.”
In response to the growing threat of PoS fraud, the Nigerian Electronic Fraud Forum (NeFF) has joined forces with the Association of Mobile Money and Banking Agents of Nigeria (AMMBAN) and the Nigerian Inter-Bank Settlement Systems (NIBSS) to combat the problem head-on.
“We are at a very advanced stage,” said the national president of AMMBAN and executive director at Ecosystem,Fasasi Sarafadeen Atanda. “We’re about to finish the technology side of it in terms of activating some features.”
Their weapon of choice? A new fraud-flagging feature on PoS terminals designed to identify and prevent fraudulent transactions.
While this development represents progress, there are lingering questions regarding the current stage of the solution’s development and the technical intricacies of its operation.
The details disclosed so far indicate that specific Know Your Customer (KYC) information will be required prior to conducting transactions.
However, it remains unclear whether these details will be requested by the agent or the PoS machines themselves.
However, several challenges hinder the development and implementation of this feature.
Firstly, there are various types of PoS fraud, and it remains uncertain which types the feature intends to address. Notably, two prevalent types involve unauthorised transactions initiated by PoS agents and fraudulent chargeback requests made by customers.
Unauthorised transactions occur when PoS agents unlawfully obtain cardholders’ details and authorise transactions without their consent. Preventing such fraud requires stringent authentication measures, possibly including biometric verification before transaction authorisation.
On the other hand, chargeback fraud involves customers falsely claiming non-receipt of value for payments made to merchants, leading to refunds. Merchants face difficulties refuting such claims, especially when they occur long after the transaction’s completion.
Experts said addressing this challenge necessitates revising policies regarding chargeback timelines and verification procedures.
While the introduction of the fraud-flagging feature is a positive step towards combating PoS fraud, comprehensive measures addressing its multifaceted nature are essential for ensuring the security and integrity of electronic transactions in Nigeria.
“Fraud cases are among the serious issues we face due to the indiscriminate allocation of PoS terminals by issuers,” said Victor Olojo, a stakeholder at AMMBAN. “I am saddened by the spate of PoS frauds recorded daily.”
Commenting, a cybercrime expert, William Onafowokan, told NATIONAL ECONOMY that there was the need for the government and security agencies to sensitise PoS customers on the safe use of their cards and how to prevent them from falling victim to fraudsters.
“Not much awareness has been created to sensitise those that patronise PoS operators about the inherent dangers. Relevant government and law enforcement agencies have not really done much. There are so many people who have not been enlightened on how to protect themselves,”
He regretted inadequate education and awareness on the use of PoS machines and advised PoS merchants to adopt a system through which the identity of a customer is documented and pictures discreetly captured by a camera.
“Government and law enforcement agencies should enforce it. With this, if anything happens at the end of the day, the person can be tracked,” he added.
Onafowokan further implored banks to be more proactive to customers’ complaints regarding fraudulent acts, rather than delay and in the process, have fraudsters destroy evidence that can be used against them.
He also urged individuals to block their accounts immediately if they suspect any fraudulent activity, as it would halt further losses.
But the battle against PoS fraud is not just about regulations and technology – it’s also about education and awareness.
In rural villages and urban slums alike, community leaders and grassroots organisations are working to empower Nigerians with the knowledge they need to protect themselves from fraudsters.
“It is important for individuals to block their accounts immediately if they suspect any fraudulent activity,” advised Paul Ojo, an IT specialist in a leading commercial bank in Nigeria. “With this, if anything happens at the end of the day, the person can be tracked.”
While the CBN has introduced guidelines and regulations to govern the operation of PoS terminals, including licensing requirements and performance standards, enforcement remains a challenge. The fragmented nature of oversight, with PoS terminals issued by both banks and private companies, contributes to gaps in regulation and accountability.
Also sharing his views with NATIONAL ECONOMY cybercrime expert, Dr Clement Imale, reinforced the need for government and security agencies to sensitise PoS customers on the safe use of their cards and how to prevent falling victim to fraudsters.
He lamented the lack of awareness among those who patronise PoS operators, urging relevant government and law enforcement agencies to do more to educate the public.
Imale advocated for the adoption of a system where the identity of a customer is documented, and pictures are discreetly captured by a camera to enhance security.
He also called for enforcement by government and law enforcement agencies, stating that such measures would enable tracking of individuals in case of fraudulent activities.
Public affairs commentator, Mr Ikenna Udodi on his part, advised individuals to block their accounts immediately if they suspect any fraudulent activity to prevent further losses.
Echoing similar sentiments, IT specialist Mr David Omotosho, emphasised the need for a multifaceted approach to curb the trend of PoS scams.
He stressed the importance of strengthening regulatory enforcement mechanisms through regular audits and sanctions for non-compliance.
Omotosho also highlighted the importance of collaboration between financial institutions, law enforcement agencies, and industry stakeholders to combat fraud effectively.
Victor Umana, a Computer Science lecturer, emphasised the critical role of consumer awareness and education in mitigating PoS scams.
He underscored the importance of empowering consumers with knowledge about safe payment practices, including protecting personal information and verifying transaction details.
Umana also called for initiatives to promote financial literacy and digital literacy, particularly among vulnerable populations, to enhance resilience against fraudulent schemes.
NATIONAL ECONOMY acknowledges that while digital transactions offer immense potential to drive economic growth and financial inclusion in Nigeria, the prevalence of PoS scams poses a significant threat to their success and sustainability. Addressing this challenge requires a concerted effort from regulators, financial institutions, law enforcement agencies, and consumers alike.
By strengthening regulatory oversight, enhancing enforcement mechanisms, and promoting consumer education, Nigeria can mitigate the risks associated with POS scams and realise the full benefits of a modernised payment ecosystem.
