When scammers launched a mass authorized push payment fraud attack on Nigerian banks earlier this year, one bank alone managed to spot and stop the fraudsters before any money had left its customers’ accounts. It was running NetGuardians software, write Jonathan Somers and Bernard Rono.
Despite many banks increasing their efforts to combat payment fraud, rates are rising across Africa. Last year, fraud was up 438 percent in Kenya, 174 percent in Nigeria and 144 percent in South Africa, according to research from Kaspersky Africa.
The rises indicate that efforts by banks to tighten up their fraud-protection systems –adding two-factor authentication, binding bank accounts to one digital device and even to one SIM-card serial number, and introducing daily transfer limits – are insufficient.
While these protections do indeed help stop some types of fraud, such as account takeovers and SIM swaps, they fail to spot a growing fraud type – authorized push payment fraud (APP). This helps to explain why fraud rates are rising ever higher.
APP fraud across Africa
APP fraud is where the customer is duped into making a payment or in a get-rich-quick investment scam. The scammers go to great lengths to appear legitimate, opening bank accounts, for example, with names very similar to recognizable brands – perhaps Shelll instead of Shell or MNT Nigeria instead of MTN Nigeria.
Worryingly, they sometimes manage to recruit bank employees to help them commit the fraud. This makes the fake scenario even more credible to the customer as the fraudsters can use privileged information such as bank balance and recent transactions to convince the target to transfer money. In each case, as it is the customer who initiates the payment, fraud-prevention methods like those above will not detect the fraud, so no alert is raised and the payment is completed.
Currently, victims of APP fraud across the continent are not protected by legislation or regulation and as a result banks do not have to reimburse them. But public opinion, the media and politicians are starting to wake up to the fact that such fraudsters are highly manipulative, and are calling for better protection for the victims. Customers are also voting with their wallets, leaving banks that fail to protect them and their cash.
Real-time fraud detection software to protect banks and their customers
Earlier this year, press reports in Kenya of a particularly serious APP fraud – possibly including the collusion of a bank employee – led to it being discussed in the Kenyan parliament. The publicity has hit the Kenyan bank’s reputation hard, and it seems that customers have quit.
But there are effective ways to stop the fraudsters – even when they convince a target to authorize the payment, as one bank in Nigeria recently found.
In spring this year, APP scammers simultaneously targeted the customers of multiple Nigerian banks. One bank that was targeted was running NetGuardians’ machine learning and AI-based software. It was the only bank to successfully foil all the fraud attempts on its customers. No money left its customers’ accounts. At least 500 customers at other banks were not so fortunate.
NetGuardians’ payment fraud prevention solution is highly effective at stopping financial crime – even APP fraud. It uses artificial intelligence and machine learning to build up accurate spending behavior profiles of bank customers. It looks at the timing of the transaction, the amount, destination and many other parameters. When it spots an anomaly, it raises an alert in real time before any money has been transferred.
Besides building customer profiles, the software also shares and analyzes anonymized bank data (while remaining compliant with regulations), learning from a wider pool of community intelligence. This allows banks to spot newly opened bank accounts, for example, or sudden changes in the volume of transactions through an existing account – both red flags for financial crime.
In the Nigerian APP scam case, the software spotted a new destination account, one to which the customer had never sent money before, nor had the bank on behalf of any of its customers, nor had other banks within the NetGuardians community. It protected the banks’ customers perfectly.
The NetGuardians solution is highly effective at spotting fraud, but also very accurate, raising minimal false alerts to ensure customers are not troubled unnecessarily. This is thanks to its ability to learn how customer behavior changes over time, evolving the profile accordingly. Banks using the software typically see a bank fraud detection rate of up to 99 percent, with alert rates as low as 1 in 10,000 transactions – representing falls of up to 85 percent. This helps cut operating costs by 75 percent.
But there’s more. NetGuardians software isn’t just highly effective and cost-efficient at spotting fraud. It can also identify mule accounts purposefully opened to launder money and move APP related fraud proceeds. Thus, it protects the bank from the threat of sanctions, fines and criminal proceedings associated with being involved knowingly or unknowingly in money laundering. It’s double reputation protection and unbeatable financial crime prevention.
Rising fraud rates mean rising risks for banks. And with the public, media and politicians demanding banks do more to protect customers from the fraudsters, those banks that lead in this area have a real competitive advantage. Isn’t it time your bank better protected itself and its customers? Isn’t it time your bank installed NetGuardians?