Technical glitches during a critical data migration allowed customers at Kenya’s largest bank, the KCB Group, to withdraw sums above their bank balances. Customers withdrew around $7.7 million (KES 1 billion) from October 11 to 31, ten people familiar with the matter told TechCabal.
The bank has restricted the accounts of customers who overdrew their accounts and has notified them, people familiar with the matter said. The bank is also prepared to use loan recovery companies. After migrating its databases from on-premise to a colocation centre, the bank attempted to integrate its cloud databases, leading to a syncronisation error.
“After moving servers, the balances were not updating in real-time at the backend. That’s why customers could overdraw the accounts,” one person familiar with the matter said.
KCB-M-Pesa target savings accounts, which allow people to access short-term loans and save, were the worst hit. “People could withdraw up to three times the saved amount,” said one person with direct knowledge of the account.
The technical glitches, which lasted over three weeks, paint a picture of the bank’s struggles to modernise its IT infrastructure.
A high-priority notice sent to KCB staff during the crisis showed that employees were sometimes“unable to access affected systems,” resulting in hours of service interruption or total outage.
KCB Group declined to comment.
At a crisis meeting on October 12, top executives discussed how to address the issue and explored recovering the lost funds. The bank has since held other similar meetings.
Fraud is a growing concern in Kenya’s financial services sector, with banks losing about $130 million yearly, according to credit reporting agency TransUnion Africa.
Most banking fraud cases go unreported, as lenders resolve them quietly, albeit with the knowledge of the Central Bank of Kenya (CBK) and other financial sector regulators.In 2023, Kenya’s Financial Reporting Centre (FRC), an agency that tracks money flow in financial institutions, flagged more than $600 million linked to card fraud, corruption, and terrorism.
