TheCable

BY CHIKA NWOSU

In 2023, 75 percent of all equity funding directed towards African fintech startups was captured by a select group of ten fintech ventures; with South Africa leading the pack with four fintech companies, followed by Nigeria with three. 

In total, startups in the continent raised at least $2.9 billion through deals of $100,000 and above, comprising equity, debt, grants and others, but excluding exits. 

With about 254 fintech startups, Nigeria boasts one of the most rapidly expanding ecosystems for fintech startups in Africa. However, while this is an impressive achievement, it presents a fertile environment for financial fraud to flourish. 

For context, let’s take a look at the statistics. Following the rise of digital payment platforms, fraud loss in Nigeria’s banking sector increased by 325% between 2022 and 2023, according to the Nigeria Inter-Bank Settlement System (NIBSS). 

With an estimated 83 million internet users – expected to increase by 48 percent by 2027 – and a projected rise in smartphone users to over 140 million by 2025, rising fraud incidents in Nigeria was only a matter of time.

It has not helped that Nigeria’s poverty level is at an alarming rate of 38.9 per cent, with 87 million of the population living below the poverty line – the world’s second-largest poor population after India – according to the World Bank.

While stakeholders like the Fintech Association of Nigeria (FintechNGR) work on a fraud reporting framework for the Nigerian fintech ecosystem, in the meantime, fintech companies should reevaluate their in-app safety features.

To protect their users from the potential impact of fraud attacks, fintech companies can start by employing a closed-loop risk management system that helps with the continuous monitoring, analysis, and quick response to fraud threats in real time.

While they do that, responses from their customer support team can be quicker and more robust, with about 90% to 98% of all issues resolved within 24 hours, using multiple channels including in-app live chat, calls, emails and social media.

Also, to reduce incidents of fraud, protect users from fraudsters, and provide a safe banking environment for all, fintech companies can bind their users’ phones to their apps while having an auto-logout and biometrics feature to confirm users’ identity.

User experience has shown that biometric authentication features are a great tool and support for secure payments and allow for the easy marrying of the security of fintech apps with a seamless customer experience to create a balance.

In building apps with easy-to-use products, while precaution remains the best protection against fraud, fintech companies should also run safety workshops to educate users on securing their wallets against the risk of fraud attacks.

Via these safety workshops, fintech companies can educate their users on various safety topics covering payment security and common everyday security issues, such as password management, fraud detection, phishing and risk identification.

Since Nigeria’s rising fraud incidents have been linked to poor digital and financial literacy, organising these safety workshops is a way to show that fintech companies understand user education as a key tool to protect users and curtail fraud.

This approach to user safety, using a bouquet of safety features consisting of in-app multi-factor security authentication and wallet safety workshops, remains the most effective approach in preventing incidents of fraud against fintech users in an expanding fintech landscape riddled with potential fraud attacks.

Chika Nwosu is the managing director of PalmPay Nigeria