By Babajide Komolafe

E-payment is good but it is vulnerable to fraud.

E-payment fraud is on the rise with many falling victims every day. But you don’t have to be one of the victims and you should not be.

The first step is to protect yourself from e-payment fraud, and critical factor to this is to acknowledging the reality of e-payment fraud and the fact that it is usually perpetrated by ‘insiders’, those who work in the financial institutions that offer e-payment services.

Three factors are necessary for e-payment fraud: Ignorance of the customer; carelessness on his part or that of the bank staff, and weakness or loopholes in the system of the organisation offering e-payment services. The first two were discussed in the last two editions. Today, we focus on the third factor- weakness or loopholes in the system.

As end user of e-payment, you need to realise that e-payment systems or platforms are operated by human beings, who are not perfect, and hence the system they operate cannot be perfect. The ‘insider’ e-payment fraudster knows this and always seeks to discover and exploit the weakness in the system.

In one of the Nigeria E-fraud Forum meetings, it was revealed that these fraudsters discovered that they can defraud an account holders by transferring negative values to their accounts. In other words, the fraudster (bank staff now), transfers minus N20, 000 (-N20, 000) from his own account to the account of another customer, via internet banking platform.

Thus the account of the customer reduces by N20, 000, while that of the fraudster increases by the same amount. It is amazing how they discover this method, but it shows that they are always seeking to identify inherent weaknesses in a system.

There is a standard for securing e-payment system from fraud and the CBN has mandated all the banks and e-payment service providers to comply with this standard. The reality, however, is that because the system and the standard are operated by human beings, they can be manipulated to perpetrate fraud.

There are also honest mistakes or erroneous functioning of the e-payment system. For example, a bank customer may be receiving transaction alerts containing sensitive account details of another customer! If that former customer is dubious he might explore ways of using that information to defraud.

And the bank or the owner of the account would never know until money is lost. Another example is that of a bank, a subsidiary of an international bank. A systemic error made the bank’s ATMs to begin to give out money arbitrarily.

A customer discovered this, but instead of alerting the bank, he informed his friends. By the time the error was discovered, the bank had lost huge amount of money. Such error occur from time to time in the banking industry, but they are not made public, so as not to scare customers.   They cannot be completely eliminated.

The fraudster knows this and hence, he is always on the look out for systemic weaknesses that can be exploited to commit fraud. As an end user of e-payment services, having this understanding will enhance your vigilance and compel you to be careful whenever you are making transactions via e-payment.