We need each other. Building bridges, creating alliances, and pulling down walls will catapult us further. It will create an effective community. Distrust will vaporise. Trust will emerge. The ecosystem will thrive. This is how the underworld works. Trust is the currency the underworld spends. Not money. If a gang member betrays this trust, death is the penalty. But what do we do in an ecosystem where trust is alien? Where distrust reigns? Where the ecosystem has morphed into an echo system?
Meanwhile, ethical hackers allied. Fraudsters compared notes. Looters shared the loot. Once I overheard two cultists exchanging ideas about a proposed strike. Why not? Coming together to fight the enemy should not be a debate. Or should we debate it? So, why do the Fintech firms watch each other like hawks? Why have they refused to share data? Why do they hide industry intelligence? Why do they refuse to close ranks? If Fintech firms build walls and do not trust each other, who will? Me? Or you?
On the one hand
Ok, ok. I know data protection rules may not allow Fintech firms to unite and form anti-fraud groups. That is not the core of why Fintech will not come together. The real reason is that they simply do not trust each other. Why? I do not know. Maybe this story will help. A software person left a neo bank recently and joined a competing brand. She left with some business intelligence that would be valuable in her new abode. Her former employer was distraught.
She has not committed any crime. Changing jobs is a regular occurrence in that space. Does that imply the next staff should be starved of the data to perform her duty? Either yes or no, fraud happens. Willy-nilly. Fintech firms cannot be too vigilant.
Between 2020 and 2021, fraudulent activity recorded by deposit banks in Nigeria rose to 211,713 – a 44.8% jump. Data from the Nigerian Deposit Insurance Scheme (NDIC) has shown. Another KYC provider, Smile Identity, shared that fraud attempts increased by 50% between the second half of 2020 and the first half of 2022. The first half of 2022 alone recorded a 30% increase compared to the same period in 2021. In 9 months in 2020, cybercriminals had an astounding 91% success rate from over 46,000 attempts. Ah! Financial institutions and Fintech firms cannot be too vigilant.
On the other hand
TechCabal reported that Flutterwave and 12 other payment-processing firms are creating a data-sharing initiative to prevent fraud incidents by sharing data. Project Radar will “enable companies to pool details including banking and government identity data of individuals and groups that have attempted or made fraudulent transactions.”
So, will data sharing help Fintech firms curb fraud incidents? Esigie Aguele, the CEO of VerifyMe, another KYC software provider said yes. “When financial service providers (FSPs) share data, they are positioned to better identify patterns that suggest transaction fraud, leading to fewer false positives in the detection of financial crime,” said Jacqueline Jumah, a transformation specialist and a Director of Advocacy and Capacity Development at AfricaNenda, a digital payments-focused research and advocacy group.
But they are reluctant about sharing data that would help them curb fraudulent activities. Why? Because they do not want to expose their fraud detection methods. If the Fintech firms do not trust each other; and do not share data to help the ecosystem curb fraud, who will? Me? Or you?
Deloitte and the World Economic Forum have explained how fraudulent data can be shared without compromising privacy or trade secrets. Jumah said the federated analysis could be used to create master fraud detection and prevention models across transactions without ever “sharing the underlying customer data across institutional lines.”
Secrecy within the fintech ecosystem will not help the industry. Instead, fraudsters will benefit from the secrecy. As long as Fintech firms entertain distrust by refusing to collaborate and fight fraud, how will you trust Fintech?
In the short term
Guaranty Trust Holding Company (GTCO) says the bank and company as a whole experienced more fraud attempts compared to 2021.
The bank said in its 2022 full-year financial report that the number of recorded fraud incidents increased by 84.27%. It reached 27,725. The amounts associated with these fraud cases increased from ₦1.2 billion. To ₦6.4 billion.
Translation: We need each other. But if we do not fight fraud together, fraud will eat our dinner.
