The African financial landscape is undergoing a rapid digital transformation, driven by a surge in mobile phone usage, internet penetration, banking digitalization, and fintech innovation. According to the Global System for Mobile Communications report (GSMA), over the next five years, 4G adoption in the African region will more than double, reaching 45%. These changes have the potential to revolutionize the continent’s financial services industry, empowering millions with access to regular bank accounts and other financial tools for the first time. However, this progress also brings a significant challenge: the rise of digital fraud.
In Africa, stolen data and data breach cyber attacks, social engineering scams, phishing attacks, and SIM swap fraud are prevalent tactics. These malicious activities threaten to undermine the trust and confidence essential for the sustained growth of the digital financial ecosystem on the continent. As a global orchestration and whitelabel payment platform provider, with integration across 500+ local and international Payment Service Providers (PSPs) and acquirers in the EU, UK, Africa, Canada, Asia, the Middle East and beyond, Paysecure has vast experience quelling a breadth and ingenuity of fraudulent tactics employed across different markets. Further, we will delve deeper into these strategies.
The Cost of Inaction
While there are no recent reports on the financial damage of digital fraud in Africa, a report by the cybersecurity firm, Serianu, estimated that cybercrime would cost Africa $4 billion in 2020. This figure represented a significant drain on the continent’s resources, particularly for small businesses and individuals who are often the most vulnerable to fraud due to the lack of awareness on cybersecurity and poor access to defense tools. The reputational damage suffered by the likes of Nigeria’s leading lender First Bank in its recent chargeback fraud – involving over N40 billion ($29 million) – can damage trust and deter customers and investors. The country’s largest bank, Access Bank, also lost NGN2 billion each ($3 million) in a month due to data breaches.
Paysecure’s Strategies to Mitigate Digital Fraud
To safeguard Africa’s digital future, a comprehensive approach to fraud prevention and mitigation is imperative. This involves leveraging cutting-edge technology, strengthening regulatory frameworks, fostering collaboration between stakeholders, and raising awareness among consumers.
- Understand the market and the fraudulent behaviors
It is crucial for businesses or merchants collecting cross-border payments across the region to partner with a payment orchestration platform provider supported by R&D experts in their respective market. Our Paysecure local specialists get firsthand experience with the specific fraud tactics prevalent in the region. In our experience, they have become indispensable assets in identifying suspicious activity based on local trends and payment behavior, allowing our orchestration platform to be more responsive to regional threats.
Africa is a continent with 54 different markets and dissimilar regulatory frameworks for data security, payment processing, and KYC capture, which at times create loopholes for syndicates to infiltrate user accounts and move funds. An example is the standard KYC identification across Africa, the national ID card, which comes with varying levels of security features for different countries. Some use laminated paper, some have quality polycarbonate cards while a few developed countries like South Africa and Nigeria have plastic cards with security elements like hologram overlays and color-shifting inks. Obviously, user identity theft will be easier in countries using laminated ID cards. At Paysecure we have insights into this peculiarity through our experts on the ground. This enables us to innovate flexible solutions that adhere to all relevant regulations, and that help our clients to reduce the risk of compliance fines and operational disruptions.
This knowledge of the local context and language helps us in customizing fraud detection and prevention algorithms, as well as in generating rapid responses to better block out identity theft, data breaches, suspicious phishing attacks, and socially engineered scams. This faster response time minimizes potential customer loss and damage caused by security breaches.
- Verify user patterns
In any business operation, the foundation of fraud prevention is ensuring the effective capture and verification of user identity. Gone are the days when a simple password was enough to secure online transactions. Implementing multi-factor authentication (MFA) adds layers of security by requiring users to provide additional verification factors, such as a one-time code sent to their phone or biometric authentication (fingerprint, facial recognition). These unique biological identifiers are much harder to forge than traditional passwords or PINs. This makes it significantly harder for fraudsters to steal identities or hijack accounts and move funds even if they obtain user login credentials.
Consequently, our Whitelabel solution is armed with enhanced transaction security capability, a unique Trust Score system, customized KYC processes, and detailed analysis of user profiles. This includes chargeback scores, payment history, and device fingerprint assessments, to secure businesses and user funds. In our line of work, to improve security and reduce chances for digital fraud on the continent, the standard transaction authentication should move from single-factor authentication to multi-factor enabled.
Furthermore, our User Trust Score has an innovative system that weeds out potential fraudsters, minimizing chargeback fraud and keeping payment systems secure. It analyzes a wide range of data points, from user’s past transactions to device fingerprints, to create a comprehensive picture of customers’ trustworthiness. This 360-degree view empowers businesses to make informed decisions, increase the longevity of the payment process, and exercise better control over chargebacks. By identifying trustworthy users, businesses can safely raise transaction limits, streamlining the process for honest customers and fostering trust in transactions.
- Stay informed and collaborate
A third strategy to mitigate fraud is collaboration and information sharing among key stakeholders. Financial institutions, fintech companies, regulators, and law enforcement agencies need to collaborate and share information on fraud trends and tactics. This can enable faster detection and response to emerging threats. For example, we have noticed that the Kenyan Bankers Association (KBA) established a fraud intelligence-sharing platform that allows member banks to share information on fraudulent activities, leading to improved fraud prevention and detection across the industry.
- Have a robust orchestration platform
Lastly, an obvious approach to plummeting digital fraud on the continent is for businesses to boost their cybersecurity infrastructure. Every other month, news of a leading fintech or crypto company and even banks going burst due to fraud makes business and technology headlines. Especially for mid-sized companies, often, adequate attention and resources are not given to cybersecurity and this is where gaps are created.
Thus, businesses must invest in robust cybersecurity infrastructure, including firewalls, intrusion detection systems, and encryption, which are essential to protect sensitive financial data from hackers. Regular security audits and vulnerability assessments must also be conducted to identify and address weaknesses in systems.
Up to 5,000 transactions pass through our robust solution per second supporting 180+ currency conversion with 100+ pay-out methods. Our system is protected by a world-class robust cybersecure infrastructure which can offer African PSPs and businesses advanced security. We have bagged the 2022 update of ISO 27001 certificate, the globally recognized standard for Information Security Management Systems (ISMS). Our PCI DSS Level 1 certification is the most rigorous level of compliance within the Payment Card Industry Data Security Standard (PCI DSS). It’s designed to ensure the strongest security measures are in place for organizations that handle over 6 million Visa transactions annually of card transactions and some variations depending on the specific card brand.
The digital revolution in Africa presents a unique opportunity for financial inclusion, but it also demands a collective response to the growing threat of digital fraud. By implementing a multi-pronged approach that leverages advanced technology, strengthens regulations, fosters collaboration, and educates consumers, stakeholders can build a secure and thriving digital financial ecosystem for Africa. As a trusted partner with local expertise and a global reach, we at Paysecure are committed to being part of the solution, empowering Africa’s financial future.
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