When technology became a part of our lives, one of the ways financial institutions embraced it is by leveraging it in delivering banking services to customers. Gone are the days when people have to go queue in banking halls to make transactions, technology made us forget that experience for life. In the comfort of our homes, we now have access to all types of banking services, anytime and everywhere.

But this blessing suddenly became a terrible nightmare as fraudsters are increasingly taking advantage of Nigerians who have come to rely on technology for financial transactions. Fraud has become a big business; many customers are becoming victims daily and are falling for the antics of fraudsters who have seen technology as a more convenient means to disposes unsuspecting customers of their means of livelihood.

The Central Bank of Nigeria (CBN) who regulates the banking sector is not resting through the publishing of fraud prevention regulations. Banks are also investing in technology to operationalize these regulations, but the more they spend, the more unsuspecting customers are falling victim to fraudsters. Besides the fact that customers are losing their hard-earned money, their loss weakens public trust in the financial system. This also means businesses who provide online services cannot easily make sales as their potential customers would opt for cash against transacting electronically.

Truth be told, there are clear guidelines to reporting frauds. However, the process can be quite discouraging. Victims are frequently required to make multiple phone calls, visit bank branches, and fill out forms—a time-consuming process that seldom yields meaningful results. This inefficiency not only discourages victims from reporting fraud but also allows fraudulent activities to persist unchallenged. The burden of proof lies heavily on the victim, and the lack of transparency in the investigation process further exacerbates customer dissatisfaction.

The Financial Institutions Training Centre (FITC) publishes quarterly reports on Frauds and Forgeries in Nigerian Banks, and in the first nine months of 2024, there were over 42,000 reported fraud cases across Nigerian banks, at least 73.4% of these cases were Computer/web and Mobile fraud. Imagine if all these victims have to lodge complaints or walk into bank branches? This practically means that bank staff will be inundated with chasing fraudsters and hardly able to deliver on their core banking responsibilities. So, in addition to trust deficiencies, the financial system is clogged with avoidable customer complaints and operational heavy loads.

Investment in technology to combat fraud is critical, but banks need to evaluate the type of technology they are investing in. Banks a lone cannot combat fraud successfully, if according to the earlier FITC Fraud and Forgeries Reports, 95.1% of reported cases of fraud involved outsiders, it means Banks must look beyond their four walls. The reality is that most fraud occurs not within the fortified servers of financial institutions, but at the customer end of the chain. Social engineering, phishing, and identity theft are all tactics that exploit customer vulnerability rather than institutional weakness. This makes it clear that fraud is no longer just a technological problem; it is a human-centered issue that requires a more holistic solution.

To address this, banks must enhance current payment platforms and actively involve customers in the fraud prevention ecosystem. Empowering customers with tools to identify, report, and respond to suspicious activities is a crucial, yet underexplored, frontier in the fight against fraud. In this regard, below are recommendations I believe would significantly help banks combat fraud in Nigeria’s financial system.

Smart electronic transaction platforms

The Nigerian electronic financial system is quite advanced, with features such as real-time transfers and name inquiry validation, we already have some intelligence that has reduce operational loads on back-end staff. In the past, money was transferred to the wrong customer because of the absence of a name validation system. When this feature became a practice, a lot of potential “transfer to wrong account” issues, ended and significantly reduced customer complaints because customers have been provided some visibility into who indeed they are making transfers to.

This system can be adopted for fraud prevention by empowering customers with one additional information that tells them the status of an account before they enter into any interchange with them. By creating a seamless connection between payment platforms and the Nigeria Inter-Bank Settlement System (NIBSS) industry fraud database, institutions can automatically flag transactions to high-risk accounts. When such a transaction is initiated, the system should either delay it for manual review or block it altogether pending further verification.

This proactive measure could prevent a significant number of fraud cases before they occur. If the system tells the customer that the account they are trying to do business with is a potentially fraudulent account, with warning such as “this recipient has been flagged for suspicious activity, proceed with caution or contact us for assistance”, customers will be more likely to exercise caution before proceeding. That singular information can save customers a lot of stress from being a fraud victim.

Enabling Real-Time Fraud Flagging by Customers

Sometimes and indeed fraud may happen if one does not pay attention to important red flags. However, upon realizing that one has fallen victim, how easy is it for customers to quickly notify their banks? How about banks empowering their customers with the ability to flag fraudulent transactions directly through their banking apps and online portals. Rather than being passive victims, who starts running after fraudsters by calling customer complaint lines or rushing to the nearest bank branch, customers should be empowered as active participants in the fraud detection and reporting ecosystem.

Imagine a scenario where a customer suddenly realizes that they have indeed made an error and have become a fraud victim, what if they are able to use their banking platform initiate a notification to their bank that a transaction has been made to a potential fraudster? That ability, right there on their bank app or banking platform, will reduce the additional workload customers would dump on banks’ call centre. This will not slow down the cash-out process of fraud proceeds, it will highly increase the chance of fraud recovery, expedite the response time and create a digital audit trail that enhances transparency and accountability in fraud investigations.

3. Mandatory Publication of Flagged Accounts

Finally, the CBN must mandate the monthly publication of flagged accounts. This database should be accessible and regularly updated to include accounts that have been reported or confirmed to be involved in fraudulent activities. Majority of the over 42,000 reported fraud cases in the first 9 months of 2024 are linked to transacting accounts that may still be out there fleecing unsuspecting customers of their funds.

Providing that transparency, would serve as both a deterrent and a warning mechanism. Individuals and businesses could check the database before engaging in financial transactions, thereby reducing the risk of falling victim. Moreover, public awareness of fraudulent accounts would foster a sense of collective responsibility and vigilance across the financial ecosystem.

Conclusion: A Call to Action

Fraud is not just a technical issue; it is a systemic challenge that demands a multi-faceted, collaborative approach. By acknowledging the limitations of technology, reforming inefficient reporting mechanisms, and providing customers with access to actionable fraud intelligence, Nigerian banks can significantly improve their fraud prevention capabilities.

Nigerian banks alone cannot effectively combat fraud, they must recognize that customers are not just end-users, but essential partners in the fight against fraud. Through smarter systems, better integration, and a commitment to transparency, Nigerian banks can create a safer, more resilient financial environment for all.

Wale Micaiah (MIT, MBA, CISM, CRISC) is a Risk & Cybersecurity expert writing from the United Kingdom.