BUSINESS AND SECURITY ISSUES IN DIGITAL PAYMENT SYSTEMS

Patrick Akinwuntan, FCA

Managing Director & Regional Executive

Ecobank Nigeria.

AGENDA

1. Introduction

2. Definition

3. Digital Payment Methods in Nigeria

4. Benefits of Digital Payments

5. Risks of Digital Payments

6. Requirements of a Secure Digital Payments System

7. Security Issues in Digital Payment Systems

8. NIBSS 2018 Fraud Landscape in Nigeria

9. Business Issues in Digital Payment Systems

10. Potential Risk Mitigation Initiatives

11. Conclusion

INTRODUCTION

DEFINITION

A digital payment system is an electronic mechanism of paying for goods or services instead of using cash or a cheque, in person or by mail.

DIGITAL PAYMENT METHODS IN NIGERIA

Banking cards

V

Mobile WalletsUSSD

Point of Sale (PoS) Internet Banking Mobile Banking QR payment

BENEFITS OF DIGITAL PAYMENTS

Faster, easier and more

convenient

Economical with lower

transaction fees

Waivers, discounts and

cashbacks

Digital record of

transactions One stop solution

for paying bills

Helps keep black money

under control

Lower cost of

processing cash

Deeper and Better

Customer Experience

Increase in Economic

Development

Scale

Efficiency

Disruption

RISKS OF DIGITAL PAYMENTS

Changes in market price, interest

rates and commodity price risk etc.

Fraud, processing errors, system

distruptions, loss of trail,

unanticipated events or disasters.

Risk associated with lending activities,

Liquidity and Interest Rates.

Bank board and management must

understand the risk involved in e-banking

services / digital payments systems

Theft of confidential information,

failure to deliver due to service

disruptions and disclosure

International laws, suspicious transactions ,

cross border transactions and Risk of

changing legislations & KYC issues

Compliance/Legal Risk Market Risk

Strategic Risk Credit Risk

Reputation Risk Operations Risk

Privacy

Communications and data

are kept private

Integrity

Communications have

not been changed

in transmission

Availability

The payment system must be

accessible to users when

ever they need it

Traceability

The data to be transferred

was, in fact, generated by

the signed author

Authenticity

The client and server are

who each claims to be

Requirements of

a Secure Digital

Payment System

REQUIREMENTS OF A SECURE DIGITAL PAYMENTS SYSTEM

SECURITY ISSUES IN DIGITAL PAYMENT SYSTEMS

Fraud & Chargeback

Non reliability of devices and IT infrastructure

Security Risks Innovations in online and web-based channels

Forecast for 2019

Digital Fraud Schemes1

More Mobile, More Fraud Attempts

2

Rogue Apps and Software on Mobile

3

NIBSS 2018 FRAUD LANDSCAPE IN NIGERIA (1/2) A SUMMARY AND ANALYSIS OF E-PAYMENT FRAUDS IN NIGERIA

Number of fraud transactions

25,043

38,852

2017 2018

+55.1%

11,492

38,852

9,471

1,734

272

9,972

3,714

1,996

187

Web

POS

Mobile

ATM

Across the counter

Internet Banking

14Cheques

e-Commerce

Others

Total

599

2,081

497

391

202

163

Mobile

POS

ATM

Others

Across the counter

Internet Banking

Web

14

93

19Cheques

e-Commerce

103

Total2017

2,081

1,632

2018

+27.5%

NIBSS 2018 FRAUD LANDSCAPE IN NIGERIA (2/2) A SUMMARY AND ANALYSIS OF E-PAYMENT FRAUDS IN NIGERIA

Actual loss value of fraud transactions

Naira millions

POTENTIAL RISK MITIGATION INITIATIVES

BUSINESS ISSUES IN DIGITAL PAYMENT SYSTEMS

Payment Integration

Lack of integration can hamper the smooth

flow of services in a digital payments system.

Clean Data

Many organizations have old data stored in

different formats and in silos. Constant need

for data scrubbing to facilitate better service,

reporting and analytics.

Standards

Digital payments system must have standards

that can be implemented across various

countries to facilitate cross border payments.

Entrance of Global Players

Global technology companies such as PayPal, Facebook and Apple

have made significant in-roads into the payments space and could

exclude other payment service providers from offering services on

their platforms

Connectivity Issues with Payments

Factors including poor network connection, double debits for

purchases, or faulty equipment can lead to transaction failures,

creating reconciliation issues for merchants, consumers and banks

alike.

17,260 agents registered,

$1,021 million processed

Over 9.3 million registered,

$2.4 billion processed

126,000 merchants

$47 million processed

Over 220,000 downloads

20,600 registered businesses

$21.5 billion processed in 2018

$435 million processed in

2018Ecobank POS

ECOBANK IS COMMITTED TO BUILDING A STRONG DIGITAL PAYMENTS ECOSYSTEM

IN CONCLUSION

Consumers and businesses have benefited for

the evolution of digital payments

The digital payments ecosystem is constantly

evolving with the influx of Fintech firms and

global tech giants

Regulators cannot afford to sit on the side-lines

Key stakeholders need to ensure compliance

with global standards and collaborate

for success

Overall, the future is bright for service providers

and consumers – both locally and internationally

…

Thank You