Financial inclusion: Appraising digital platforms’ gains, emerging threats

Doubtlessly, Nigeria has since the launch of the National Financial Inclusion Strategy (NFIS) on October 23, 2012 by the Central Bank of Nigeria (CBN) been committed to the implementation of the strategy
with so much to show for the efforts in terms of deepening financial services and promoting financial literary nationwide in line with global best practices.

The Strategy articulated the demand-side, supply-side and regulatory barriers to financial inclusion, identified areas of focus, set targets, determined key performance indicators (KPIs) and established the
implementation structure.

Specifically, the key targets of the strategy are that adult Nigerians with access to payment services would increase from 21.6% in 2010 to 70% in 2020, while those with access to savings would also grow
from 24 percent to 60%; credit from 2% to 40%, insurance from 1% to 40% and pensions from 5% to 40% within the period.
An appraisal of the implementation of the Strategy in 2016 showed that a total of 40.1 million adult Nigerians (41.6% of the adult population) were financially excluded while 55.1% of the excluded population were women, 61.4% of the excluded population were within the ages of 18 and 35 years, 34.0% had no formal education, and 80.4% resided in rural areas.

The NFIS 2012 was replaced a few years later with the launch of National Financial Inclusion Strategy (Revised) edition in 2018 which revealed that the financially excluded comprised 46.5% of the females,
52.5% of those in rural areas and 53.5% of youth aged 18 to 25, 70% of those from the North West and 62% of those from the North East were excluded in 2016.

The major goal of this revised Strategy is to reduce the proportion of adult Nigerians that are financially excluded to 20% in year 2020 from its baseline figure of 46.3% in 2010.

The previous NFIS 2012 and NFIS 2018 were subsequently complemented with the Financial System Strategy 2020 (FSS 202O). By its design, the strategic vision of FSS 2020 for Nigeria is “to be the safe stand most diversified financial system among emerging markets supporting the real economy by the year 2020”.

The latest data from the Central Bank of Nigeria (CBN), the chief driver of the FSS 2020 implementation, clearly reflected the remarkable strides Nigeria has made in her drive to transform the payment system
from analogue to techno-powered digital alternative in line with global best practices.

Apart from the pervasive POS devices in urban and rural areas that today shows the country is making progress in the digital payment drive, the statistical data on value and volume of transactions are also
clearly reflective of good results to efforts by the CBN, banks and other financial institutions (OFIs) to modernize the nation’s payment system.

For instance, the suspended former Governor of the apex bank, Godwin Emefiele, had on 15 th May this year, stated that the financial inclusion rate in the country currently stood at 64%, which is below 70% target set for the year 2023, adding that the monetary authorities were fully committed to achieving the FSS 2020 targets.

Similarly, the influx of Mobile Apps startups and other digital lenders to the country has in the past few years been rising at a speed that clearly shows the size of the Nigerian economy, the opportunities in
the financial system’s space and investment return potential of deploying supportive technologies and solutions to the rapidly evolving market.

Curiously, as promising as the digital payment space picture appears, the Nigeria Inter-Bank Settlement System Plc (NIBSS) noted that growth in the use of electronic channels, specifically mobile devices has also enticed “devourers” or fraudsters into focusing their efforts on these channels to begin to cause “hemorrhage” in a system that holds huge benefits to all.

One area the fraudsters are focusing on, which has been raising concerns in the public in the past few years is the Unstructured Supplementary Service Data platform also known as the USSD Code, which allows users without smart phones or internet connection to access mobile banking.

Apart from the transactional hiccups associated with the USSD Code, there has also been some escalation in the rate of digital frauds in the country as hackers are taking advantage of the weaknesses
in the digital payment infrastructure to defraud Nigerians of their funds.

A leading consulting firm, Agusto & Co., in its ‘2022 Consumer Digital Banking Satisfaction Index for Nigerian Banks’ reported that approximately 59% of respondents had been fraud victims on the digital platforms of their banks.

According to official data on the level of digital payment frauds in the country, as of Q3 2022, the total number of frauds & forgeries cases reported by Nigerian banks was 19,314 compared to 27,356
incidents reported in Q2 2022, representing 29.40% quarterly drop in number of incidents. But then, there is more. While the total sum reported to be involved in fraud cases increased to N9.62
billion from N8.78 billion in Q2 2022, indicating 9.50% quarterly increase, the losses associated with the fraud incidents rose by 207.94% from to N3.62 billion in Q3 2023 from the N1.17 billion recorded in Q2 2022.

A new chapter in the sordid tales in the nation’s digital payment scenario was opened on July 20 this year by the Federal Competition and Consumer Protection Commission (FCCPC), which alerted Nigerian public of its findings which showed that some registered and approved digital money lenders (DMLs), popularly known as loan apps, were using the unauthorized means to continue their illegal practices.

The FCCPC Chief Executive Officer, Mr. Babatunde Irukera, stated: “The nature of the duplicity is that the DMLs having been approved and placed on the approved list and Playstore, as well as cleared for
services by other financial services/institutions, as an alternate channel, and method of engaging in prohibited conduct, also engaged in the use of APK to attract borrowers to a process and practice that is
illegal and unregulated.”

Barely two weeks later, precisely on August 3, the Commission also ordered Google to delist 18 loan apps from the Play Store following its discovery that the apps had been operating on the Google Play
Store without regulatory approval or in contravention of the Limited Interim Regulatory/Registration Framework and Guidelines for Digital Lending. Earlier it had authorized the deletion of 180 DMLs on its

Speaking about her recent experiences in digital transactions, a Lagos-based civil servant who simply identify herself as Olabisi Akin, told our correspondent about three transactions she did between
January and March this year in which her accounts were debited but the creditors didn’t get the money transferred to them.

She said: “I can tell you that fraud is real in the banking system. I made payments to people I owed and they didn’t receive the money. I have visited the banks involved more than three times each and what
they keep telling me is that they are looking into it.

“I think the CBN, the DSS and others should support the FCCPC in its efforts to defend the interest of helpless ordinary Nigerians suffering from this menace”, she added.

Also, another bank customer who is based in Abuja, Danladi Muhammad, expressed his bitterness over the rising digital payment risks, saying that “I have lost a lot to failed transactions through POS transfers and my experience showed that the banks were never always ready to revert such transactions.

As I speak with you now there are two un-reversed debit I am still struggling with my banks to pay back.”

Commenting on the latest threats to the hitherto beneficial and promising payment options, a financial system topnotch, Mrs. Comfort Eyitayo, expressed serious concerns about the ugly development and
advocated very strong regulatory measures to combat the illegalities in the financial system.

According to her, there are many implications for the increasing incidents of digital payment fraud predominantly associated with mobile loan apps, especially for both bank customers and the economy.
Eyitayo, who is the immediate past President of the Institute of Chartered Accountants of Nigeria (ICAN),
pointed out that as a result of digital payment frauds, bank customers suffer financial losses; they have
their personal information compromised and suffer damaged credit profiles.
She further explained: “On the economic angle, trust in digital financial services is undermined and as a
result, potential users of online payment systems are discouraged from embracing same, which may
lead to reduced economic activity due to heightened apprehensions around financial security and

On the way forward, the public finance expert and entrepreneurship trainer, said that “regulatory
actions like the FCCPC’s intervention and Google’s delisting should help to mitigate concerns of digital
payment fraud, protect consumers and uphold the integrity of digital transactions.”
Another economic analyst and Director/Chief Executive Officer, Centre for the Promotion of Private
Enterprise (CPPE), Dr. Muda Yusuf, also rued the worrisome risky trend in the financial system and called for the regulatory authorities in the system to rise up to their statutory mandates by frontally combating

According to him, these developments underscore the need for a stronger regulatory framework for social media and online transactions in view of the fact that the citizens are highly vulnerable.

Apart from advocating the cooperation of the promoters of the digital platforms, Yusuf, who is also the immediate past Director-General of the Lagos Chamber of Commerce and Industry (LCCI), canvassed:
“Activities online financial services companies should come under the regulatory radar of the Securities and Exchange Commission [SEC] and/or the Central Bank of Nigeria (CBN).

“There should be deterrent sanctions for individuals or companies that perpetrate fraudulent activities on any digital platforms”, the CPPE boss added.

“I can tell you that fraud is real in the banking system. I made payments to people I owed and they didn’t receive the money. I have visited the banks involved more than three times each and what they
keep telling me is that they are looking into it.”

“Regulatory actions like the FCCPC’s intervention and Google’s delisting should help to mitigate concerns of digital payment fraud, protect consumers and uphold the integrity of digital transactions.”

Tola Akinmutimi

See also NUPRC CCE suspends birthday celebration sighting hard times citizens are facing

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