The coronavirus pandemic lockdown may have led to an unprecedented uptake in digital financial solutions as business processes moved online. However, Ugandan banks, telecoms and fintech also suffered an unprecedented gravity of digital fraud attacks during the same period.
A recent mega fraud saw mobile money giants, Airtel and MTN Uganda that hold more than 95 per of the subscriber base lose in It's reported that the fraudsters used an abandoned company book that contained photocopies of National IDs at a photocopier stall to clone and create over 1,000 new SIM cards that they allegedly used to withdraw the money from various parts of the country.
Jane Mugenyi, the head of mobile money at MTN Uganda, said although the MTN Group in 2020 saw their customer subscription reach 45 million with more than 22 million mobile money subscribers in 15 countries, MTN, like other fintechs, has suffered increased levels of fraud.
"We saw an increase in fraudsters challenging digital adoption. I think some of you have been subjected to people calling you and saying; 'please enter your pin.' That increased a lot and it comes with digital adoption," Mugenyi said at the Digital Inclusion Summit held at Mestil hotel last week.
Doreen Lukandwa, the head of marketing and customer success at Beyonic, a software and digital financial aggregator, said the recent fraud at MTN and Airtel money was not surprising but has given the companies a chance to close out the loopholes.
"Ultimately with the introduction of anything new, there is a risk of people who are thinking in the opposite, who are thinking how do I penetrate this. How do I take advantage of what's already in place? As an industry and as a market, the onus is on us to think about the best ways to protect our customers and ourselves, and I think that is where you have seen a lot of collaborations within the different sectors but also between the public and private sector where even the central bank is coming to play a part in developing the regulations that are going to help protect the customer," Lukandwa said.
"What happened is something that is not a surprise because there are people who are trying to test the boundaries and push them as hard as possible but from that, we have learnt lessons. We have learnt how to become more security-efficient, we have learnt where the loopholes are and how to plug them... We have to be open, to be able to learn from the mistakes, to be able to learn from those who are pushing our boundaries and our buttons," Lukandwa added.
Meanwhile, Ronald Azairwe, the managing director of Pegasus Technologies, the aggregator at the centre of the mobile money fraud as it was the one linking the mobile money account to the banks, said they hope starting next year, the National Identification and Registration Authority (NIRA) will facilitate the introduction of digital identity to all financial transactions in the country.
According to Azairwe, currently people have multiple identities strewn all over the place since every institution is allowed to collect its own data. Azairwe admitted that loopholes existed in the country's digital systems before and they were made even worse by the coronavirus lockdown where people were required to work from home and fintechs and technology companies hurriedly set up platforms without enough preparations and measures.
"When we had to suddenly, the keyword there is suddenly work from home, the preparation in making sure you have the right infrastructure to work from home was rather hasty. We did not have sufficient time to prepare for these. So, we quickly had to put up just the requisite infrastructure without perhaps giving it as much thought as it should have been for people to work from home. What that did is it opened up backdoors for fraudsters who might have wanted to take advantage of that. We saw an increased trend in fraud activity and also a drop in revenues. The upside is that we have seen a greater intake for people adopting digital payments for collection and payments," Azairwe said during the panel discussion.
The rise in fraud activities, he said, will now, unfortunately, come with some intrusion into customer transactions.
"As we adopt digital technologies, the most important thing is to know every individual's digital identity. For those of you who trouble a lot, you know how much travel you go through at airports especially since 9/11. The intrusive checks that you go through - the turning up and down the take off your shoes and your belt and so on. Now in the digital space, the equivalent to that is making sure there is a rigorous process of identifying every individual and tying every transaction to an individual. Yes, it is a bit of an intrusive process, I agree, but again it is a very necessary evil, there is nothing we can do to avoid that," said Azairwe.
Already the central bank has ordered all banks to link customer bank accounts to their National ID details (NIN) with a period of one year especially for accounts that were previously opened with other documents such as passport. Azairwe says the banks and fintechs must start thinking about building information modelling because they are all working for a common goal yet each is working in silos.
"Everything digital is attached to your NIRA identity. Then we can tie every transaction to an individual. And this individual's details are not details given but details picked from the NIRA database. So, I think the loop is closing, there has been a gap that a lot of people have been exploiting because collection of information has been in working silos. Every institution has been collecting its own KYC (Know Your Customer) and of course that is a flawed system of doing things. You have one identity at MTN, you have another identity in Stanbic, you have another identity at Standard Chartered,"
"With the unification or centralisation of all this is that we have one point of truth and if we can have one point of truth which is the NIRA national ID that tags everything to an individual, we might have closed out the loop quite a bit and I hope this is the way to go. I hope 2021 will be the year when NIRA allows all parties that are involved in these processes to interact or to interact in their database and giving them the requisite information that ties everything to an individual," Azairwe added.
MTN's Mugenyi agreed and said indeed going forward, the telecoms, banks, fintechs and other players need to work together and share information when suspicious transactions are detected.
"If we know that we have a digital identity of someone who performed a very suspicious transaction in MTN, then we could share with StanChart, we could share with Airtel and if this same person goes to obtain services in these areas, they should be kind of blacklisted. So, that is how I look at it, having a collaborative forum that understands how these platforms work and we share experiences in what has happened on your side, what is happening in the banking sector such that we can mirror it into the telecom sector as well," he added.
HiPipo, the organisers of the summit, also held the 7th annual research-based awards to celebrate and promote the impact and excellence in products, services and innovations for Digital and Financial Inclusion.
Below is the list of Ugandan winners
Agritech Innovation Excellence: Hamwe
E-Commerce Innovation Excellence: Jumia
Payments Innovation Excellence: Beyonic
Disruptive Innovation: JPESA
WhatsApp Money Lending & SACCO Innovation Excellence: Social Lend Africa
Merchant Payments Innovation Excellence: Chapchap
Content Innovation Excellence: Yo Tv
Women Financial Inclusion Award: Pride Microfinance
Digital Banking Excellence: Standard Chartered Bank
Green Energy Innovation Excellence: StarTimes Solar
Digital Customer Experience Excellence (Utilities and Government Services): NWSC
Best Brand on Social Media (Financial Services, Telecom, IT): Stanbic Bank
Brand on Social Media Excellence (Consumer Goods): Movit
Digital Powered Campaign Excellence: Stanbic National School Championship
Cards Payments Excellence: Stanbic Bank Community
Banking Excellence: Centenary Bank
Digital Brand of the Year: Standard Chartered Bank