Fraud concerns may stall contactless payments implementation by banks

New pointers from the Central Bank of Nigeria (CBN) place the burden of fraud on banks. This may stall contactless cost implementation by banks.

On June 30, 2023, the Central Bank of Nigeria (CBN) launched new pointers for the operations of contactless payments within the nation. Per the brand new guidelines, such transactions will likely be restricted to ₦15,000 for a single cost or ₦50,000 day by day. However, Several banks who spoke to TechCabal stated they’re not sure of easy methods to implement the rules. “Yes, we are aware of the guidelines but we are yet to get direction on the implementation process,” an Access Bank personnel advised TechCabal. A Fidelity Bank supply stated the financial institution is engaged on an in-house implementation plan. 

According to the CBN pointers, customers can faucet or wave their units—together with smartphones and playing cards—which might be enabled with contactless know-how to make payments with out inputting a PIN to substantiate the transaction. Contactless payments are powered by radio frequency identification (RFID) or near-field communication (NFC) know-how which permits enabled units to provoke and authorise cost transactions with out extra affirmation from the person.

But the first drawback with the usage of contactless payments is the chance of fraud arising from the absence of authorization, which means a severe explanation for concern for banks and monetary establishments concerned. This YouTube video tells how scammers used contactless cost to steal from a Denver lady’s checking account. 

However, the CBN is betting that its choice to cap the transaction quantity on contactless payments will mitigate fraud dangers. Why? It works. According to the info analytics firm FICO, “information from UK Finance revealed that in 2020 there was a complete of £574 million misplaced by card fraud. However, solely £16 million of this determine represented contactless cost fraud. 

A MasterCard workers who declined to be named as a result of they weren’t authorised to talk to the media defined that the use case for contactless payments was tied to the necessity to accumulate small payments en masse at tolls and queues shortly. Even although the central financial institution stipulates an higher restrict of N15,000, card issuers can provide lower-limit contactless playing cards relying on their danger urge for food.

The large fear for banks is easy methods to deal with fraud

The pointers additionally place the burden of fraud on acquirers (the financial institution of the cost recipient), issuers (the financial institution of the purchasers), and retailers (the enterprise) who provide contactless cost channels. Placing the burden of managing fraud on retailers and banks would make it troublesome for banks to hunt to implement the brand new provisions, stated Adedeji Olowe, founding father of Lendrsqr, a software program agency that allows digital lending companies. “Abroad, where there are consequences for bad behaviour if your card was stolen and used for contactless, the bank covers the fraud. We both know nobody dares do that in Nigeria,” he commented.

While it stays to be seen how the banks will deal with contactless cost implementation, they signify a brand new hurdle for his or her safety structure, particularly in gentle of the latest reviews of hacks focused at conventional Nigerian banks and even fintechs. In 2019, Nigerian monetary establishments spent a reported N200 billion on cybersecurity. Securing contactless payments goes to extend that finances. At the Digital PayExpo hosted by the Nigeria Deposit Insurance Corporation (NDIC) and the CBN in June 2023, Chinwe Uzoho, Regional Managing Director, West & Central Africa, of Network International, identified that it prices lots to safe contact cost programs. “You have to choose between fraud and secure payments,” she stated,

In June, Globus Bank reportedly misplaced N1.7 billion to hackers. TechCabal additionally reported how Glade, a Techstars-backed fintech, suffered an inside breach that price over $200,000. Considering that a few of Nigeria’s worst cyberattacks are underreported, likelihood is extra hacks have presumably occurred in latest instances with out public data. So one factor is evident: for these pointers to work, banks should brace up their safety structure as cybersecurity turns into extra problematic in Nigeria.