In recent years, East Africa has made great strides in adopting digital payments. Notable trends that have emerged include e-commerce card transactions, contactless methods such as tap to pay and QR code payments, alongside already sophisticated mobile payment systems.
Another trend in the evolving, more comprehensive and efficient digital payments system is the partnership between financial institutions and fintech companies.
The emergence of digital payments has also created several risk challenges that consumers and stakeholders must address. These challenges include cyber attacks, SIM swap fraud, social engineering scams, digital identity theft, and regulatory issues.
Fraudsters have been reported to be using duplicate e-commerce terminals to conduct SIM swaps and cyberattacks, transferring fraudulent credits to fake bank accounts.
In some cases, fraudsters attempt to intercept and compromise one-time passwords (OTPs) used to complete e-commerce card transactions. They use different techniques like social engineering, SIM swapping, phishing or spear-phishing to achieve this.
In Kenya, for example, scammers send text messages to consumers, asking them to click on links to pay postage using their debit or credit cards to retrieve a package from the post office. This tactic causes consumers to unwittingly expose their credentials to these scammers.
Financial institutions that provide card payment services have also been exposed to digital fraud. Fraudsters seek to accept e-commerce card from banks without the intention of running a legitimate business, using terminals for illegal activities such as money laundering and exploiting stolen card details. This results in losses for banks due to disputes with affected cardholders.
The above examples highlight shortcomings in the integration of processes, personnel and tools within risk management practices. The ramifications of these incidents are far-reaching, impacting not only consumers, businesses and financial institutions, but also the broader ecosystem, including regulatory components.
Apart from losing their hard-earned money sometimes, cardholders’ trust and satisfaction with digital payment platforms is also diminishing. Financial institutions and companies may experience immediate losses, which subsequently affects their profitability.
With this in mind, Visa has intentionally partnered with industry stakeholders to help the region build a robust risk management framework that will support current and future digital payment systems, recognizing that effective risk management depends on having the right systems, processes and personnel in place. .
In the past five years, Visa has invested more than $10 billion in advanced cybersecurity, including artificial intelligence and data analytics, to combat sophisticated criminals and reduce fraud. Visa also supports payment stakeholders through training, risk management processes and consumer education.
A prime example of this was Visa Protect’s recent Executive Roundtable in Nairobi, where more than 40 customers and partners participated in discussions with Visa’s global and regional leaders about the evolving payments security landscape. They explored high-level risk and identity solutions for future digital experiences.
In summary, East Africa’s rapidly developing digital economy is expected to advance even faster in the coming years. To mitigate the risks associated with this growth, it is essential to continue investing in appropriate risk management systems, effective processes, well-trained employees, and adequately informed consumers.
Basil Kitenge is Visa Risk Director for East Africa; Titus Mbugua is Visa’s Director of Consulting and Analytics for Sub-Saharan Africa.