Rising fraud threatens POS business

BY EMEKA EJERE

The thriving Point of Sale transaction (POS) business may soon begin to witness serious dip in patronage if nothing is done to change the narrative of high infiltration of fraudster and unguaranteed safety of operators and customers.

The Central Bank of Nigeria (CBN) created the agent banking system and officially introduced the POS system in 2013 to achieve financial inclusion and develop a cashless economy.
The convenience and time-saving advantage of the system has seen many Nigerians involve in the POS business, raking in thousands and millions of naira daily.

Data from the Nigeria Inter-Bank Settlement System (NIBSS) show that in 2018, the total POS transaction was N2.3 trillion from 285.9 million transactions. In 2019, it increased to 438.61 million transactions with a total value of N3. 21 trillion. In 2020, transactions rose by 49.51 per cent to 655.75 million, with the total value rising to N4.73 trillion.

Further findings also showed that POS transactions carried out in the first eight months of 2021 stood at N4.06 trillion, representing a 45 per cent increase compared to N2.81 trillion recorded in the corresponding period of 2020.

According to the data, POS transactions hit its highest levels for any eight-month period, increasing by 44.8 per cent and 108 per cent, compared to N2.81 trillion and N1.96 trillion recorded in the similar period of 2020 and 2019 respectively.

Similarly, the volume of POS transactions recorded between January and August 2021 stood at 619.3 million, increasing by 61.8 per cent, compared to 382.9 million recorded in the corresponding period of 2020.

It is worth noting that a total of 686,577 POS terminals were deployed nationwide as of August 2021, representing an 84.4 per cent increase from 372,333 recorded in the same period of 2020.

The value of POS transactions in the country for the month of August 2021 stood at N504.88 billion, lower than N554.67 billion recorded in the previous month, while it rose marginally compared to N503.91 billion carried out in June 2021.

Also, the Nigeria Inter-Bank Settlement System (NIBSS) data show there were about 307,000 POS machines in Nigeria as of March 2021, but only 167,000 were active.

However, while many Nigerians are making legitimate income from this lucrative business, rising cases of some using it for fraudulent acts to create fake credit alerts to defraud innocent customers is fast denting the transaction channel.

Operators say fraudster exploiting some loopholes in the system.

“There is a fake alert. When money is transferred to your account by customers, you may see the alert but it could be a fake one,” said Rose Adewale, a POS operator.

“Once I am not deducted by my bank, I tell the clients to wait, even if they are deducted. I refer them back to their banks. Some of them insist on your paying them, but such alerts are fake.”

On her experience with fraudsters, Adewale said she had stopped bank transfers, using only POS which would show at the back-end of the bank.

“Someone transferred N100 000 to me when I started newly in 2017. I saw the alert but never knew it was fake. When I was balancing my account after the daily work, I discovered it was not showing at the back-end of my banking app, despite having seen the alerts on my phone. The customer is a passer-by and cannot be possibly traced. I had to bear the brunt and learnt bitter lessons.”

Another POS operator, Linda Okoro, who spoke to our correspondent , said despite recording appreciable success, she had had a nasty experience with fraudsters.

“Someone came and transferred N300 000 to me and got paid. My bank later called me and told me the guy was a fraudster, that he tapped into someone’s account and stole his money and had to resort to the POS to get the fund. That resulted in the suspension of my account for the business,” she said.

According to an August 27, 2021 reports by Premium Times, a 29-year-old commercial motorcyclist, Victor Ukachuckwu, recently narrated how he used an online application he downloaded from the internet to defraud Point of Sales (POS) operators in Ondo State.
“I saw the application online and I learned how to use it which I tried and it worked, though I used it only five times in this month.

“I made N55,000 from the fraud business before I was arrested by NSCDC operatives in Akure,” he said.

The report further quoted Hammed Abodunrin, State Commandant of NSCDC, as saying that the suspect had defrauded many POS operators with his tricks. According to him, the suspect is in the habit of going to POS operators to withdraw money.

“After he is done with POS operators, he will access his own bank through a firewall application to inform the bank that he made a transaction, which failed.

“He would tell the bank that he had bought certain things and the goods were not delivered to him so he wants the transaction cancelled and the money returned to his account. He would go back later and withdraw the reversed amount.”

Worried by the situation, the House of Representatives recently urged the CBN to, “in the public interest,” introduce stringent regulations and guidelines, including sanctions, on the POS business operations in Nigeria. The House also mandated its Committee on Banking and Currency to organise a stakeholders’ meeting for the purpose of “tackling the menace” of POS operations in the country.

The resolutions were sequel to the unanimous adoption of the motion moved by a member of the House, Jimoh Olajide, titled, ‘Urgent Need to Regulate the Point of Sale Business Operations in Nigeria.’

Moving the motion, Olajide noted that the POS is where customers make payments for products or services rendered, but due to many factors, “the POS has been turned into a lucrative business in Nigeria and has provided jobs for millions of unemployed Nigerians that see it as a good alternative to white-collar jobs in the country.”

He said, “While many Nigerians are making legal money from this lucrative business, some are using it for fraudulent acts to create fake credit alerts to defraud innocent customers hence the need for government intervention to rescue the rising business sector in the country.”

Olajide said, “The House is worried that the POS merchants in Nigeria are not only licensed by commercial banks, other private companies are currently in the business of giving out POS for business purposes, thus making the business to be more porous and ambiguous.

“The House is concerned that presently, no financial regulatory bodies in Nigeria can precisely ascertain the total number of POS machines and their operators in the country.”

However, speaking on a television programme, ‘Weekend Deal’, which x-rayed the benefits and challenges of POS since its inception, Damola Bolodeoku, Head of E-Business at Wema Bank Plc, noted that POS business has witnessed 86 per cent growth in the last two years and has helped to bring a large segment of Nigeria’s informal and unbanked population into the formal financial system.

On dispute resolution protocols arising from dispense error and fraud, Bolodeoku advised POS customers to lodge complaints with their banks immediately for proper investigation to be conducted and the disputes resolved.

On the monitoring and supervisory framework developed by banks to monitor the operations of POS, Bolodeoku explained that direct bank agents appointed by the banks are monitored through due diligence and know-your-customer (KYC) exercise.

“The banks that appointed them in case of fraudulent reports against them can sanction such agents,” he buttressed. He recommended that network connectivity should be improved upon for efficient operations, as this will further boost the operations of the POS in the country.