strategies for fraud management in emerging payment environment for... · 2013-09-12 · 2%...

September 2013

Strategies For Fraud Management in

Emerging Payment Environment

A presentation by:

Mrs Christabel Onyejekwe

Executive Director ,Business Development

NIBSS Plc

2

Outline

A. INTRODUCTION

B.MODES OF PAYMENTS, FRAUDS & STRATEGIES FOR FRAUD MGMT

C. FRAUD MANAGEMENT SOLUTION (GTMS)

D. NIBSS INITIATIVES & CONTRIBUTIONS

3

NIBSS Critical Stakeholders

The requirements of Cash-Less Nigeria project necessitates integration of NIBSS to Banks, Switches, Non-Bank Financial Institutions, Mobile Payment

Operators, among others

http://www.citigroup.com/citi/global/nga.htm

http://www.standardchartered.com/ng/en/

http://www.accessbankplc.com/

http://www.diamondbank.com/

http://www.ecobank.com/

http://www.enterprisebanklimited.com/

http://www.firstcitygroup.com/fcmb/

http://www.fidelitybankplc.com/

http://www.afribank.com/

http://www.stanbicibtcbank.com/

http://www.firstbanknigeria.com/

http://www.bankphb.com/

http://www.skyebankng.com/

http://www.gtbank.com/

http://www.unionbankng.com/

http://www.sterlingbankng.com/

http://www.ubagroup.com/

http://www.unitybanknigeria.com/

http://www.wemabank.com/

http://www.zenithbank.com/

4

NIBSS Mandate

Provides a shared service/infrastructure for the

Nigeria financial system

A payments processing Company for payments

schemes (local & international) in Nigeria, and act as

a settlement Company for both inter-bank and inter-

scheme payments

Initiates and develops an integrated nationwide

network for the electronic or paperless funds transfer

and settlement of transactions.

Provides framework for elevating the level of

efficiency in funds transfer services generally

1

2

3

4

5 NIBSS commenced operation in June 1994.

5

Nigeria’s Payment Landmarks

1993 2002 2003 2004 2006 2007 2009 2010 2011 2012

• Incorporate of

NIBSS

• Automation of

Cheque Clearing

through MICR

• Settlement

Processing

• Launch of NACS

for electronic

clearing of

cheques

• Reduction in

clearing cycle to

T+3 local & T+5

upcountry cheques

• Guideline on e-

banking introduced

to provide catalyst

& regulatory

framework for

automation in

banking

• Establishment

of switching

company for

interoperability

of shared

ATM/POS

banking

• Implementation

of RTGS

System T24

eFass & ERP

• Establishment of

National Central

Switch

• Payment System

Vision 2020

introduced

• CBN Act amended

giving CBN regulatory

authority over

payment system

• Reduction in clearing

cycle to T+2 local &

T+3 upcountry

• Mobile Payment

Regulatory

Framework

• Guideline on

Transaction

Switching &

Prepaid cards

introduced

• Guidelines on

ATM Operations

released

• NUBAN

introduced to

reduce delays &

clearing errors

related to wrong

account numbers

• Cash-Less

policy

introduced

• CBN began Cash-

less roll out in Lagos

• Financial inclusion

launched

• Cash-Less roll out to

5 states & FCT

• Cheque Truncation

Nationwide

• Agency banking &

Tiered KYC

guidelines 2013

6

NIBSS Major mile stones in 2013

PCI DSS Certification

Successful operations from disaster recovery site

Upgrade of network infrastructure.

Deployment of Cheque Truncation nation-wide

Improved aggregation/switching services

1

2

3

5

5 NIBSS is poised to do more.

4

7

Unlocking the potentials of the Nigerian electronic payments

Nigerian Payments Industry international benchmark

Source: Nigeria (CBN & NIBSS / cards and ATM related info from end-June 2012; POS related 2012 info), Angola (EMIS / 2012), South Africa (BIS / 2011) and Portugal (SIBS / 2012).

Order ->

138 157

1,275

1,792

Cards (per 1,000 inhabitants)

59 107

493

1,290

ATM (per 1,000,000 inhabitans)

1,113 1,413 5,685

25,421

POS (per 1,000,000 inhabitants)

2,043 15 6,126 868

21,842 22,853

83,109 70,503

Transactions ATM (per 1,000 inhabitans) Transactions POS (per 1,000 inhabitants)

Nigeria is still an emerging market

E-payments on the rise

8

“Electronic Fund

Transactions Hit N80b

Daily”

May 14, 2013

The e-payment as a mode of financial exchange is increasingly on the rise.

Comitment to fight Fraud

9

“CBN Pledges to

Tackle Electronic

Fraud” _Tunde Lemo

June 24, 2013

The deployment of industry system anti-fraud solution for Nigeria will greatly tackle the menace of fraud.

10

283 334

413 478

570

725 773 813 803

898

1,011

1,153

-

200

400

600

800

1,000

1,200

1,400

Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13

NIP Volume (In thousands)

290 342

397 461

492

592 589

682

573 639

709 769

-

100

200

300

400

500

600

700

800

900


NIP Value (N In billions)

NIP has continue to

record impressive

growth since the last 12 months.

Since June 2012- to date NIP has processed over 8.2m valued at over N6.5trillion

NIP SUCCESS STORY

11

PoS monthly volumes moved from an average

volume of 120,000 in the

previous year to an average of

430,000 monthly volume.

POS IS GROWING STEADILY

192 236

270 262

330

407

478 456 442

537 511

604

-

100

200

300

400

500

600

700


POS Volume (In thousands)

4

5 5 5

6

8

9 9

8

10 9

11

-

2

4

6

8

10

12


POS Value (N In billions)

12

NIBSS ATM switching over

the NCS

Standard Chartered Bank is enjoying this

service

ATM PERFORMANCE

1 2

2 2 2

4

5 4

7

8

6

10

-

2

4

6

8

10

12


ATM Volume (In thousands)

15 22

29 27 34

53

75

57

86

109

70

124

-

20

40

60

80

100

120

140


ATM Value (N In millions)

13

Increasing integration of

MPOs to the NCS promoting Inter-scheme mobile

payments

High volume growth

anticipated as MPOs

interoperate with ATMs and DMBs

MOBILE PERFORMANCE

41 128 204

646 360 395 499 474

801

1,357

2,160

2,892

-

500

1,000

1,500

2,000

2,500

3,000

3,500


Mobile Volume (In thousands)

0 1 1 4 3 4 5 5

9 11

41

64

-

10

20

30

40

50

60

70


Mobile Value (N In millions)

14

NIBSS Central Terminal Management System offers avenue for payment terminal transaction monitoring with steady growth in number of active terminals.

PTSA PERFORMANCE

152 159

165 170

182 186 189 188 189 190 184

175

89 95

101 103 108 111 114 115 116 117 117 120

12 13 16 22 23 23 27 29 30 32 31 36


PTSA Performance (In thousands)

Registered Deployed/Connected Active Linear (Active)

15

The trend is for fraud to move to e-payments where a major growth is being experienced.

The money is now in e-Channels….

Reporter Mitch Ohnstad : Why do you rob banks?

Willie Sutton (Famous robber): “Because that's where the money is."

Follow The Money…..

16

Outline

A. INTRODUCTION




MODES OF PAYMENT

17

- Account Based -NEFT, NIP, RTGS, SWIFT e.t.c

- Card based -ATM, POS, WEB

Mobile Payments/NFC -MPO, NFC

Cheque Based

Cash Based

Summary of Frauds in Nigeria

18

So

urc

e: F

itc

19

• The risk of fraud cases using card not present is expected to go higher as a result of increasing

adoption of cards.

• Incidences of card skimming is expected to reduce (as a result of migration to EMV).

• Physical attacks on ATMs may continue due to security situation in the country.

The majority of Nigerian Banks already experienced some kind of electronic payment related fraud over the last 3 years.

Experienced frauds over the last 3 years

Others1

13 (62%)

10 (48%)

7 (33%)

2 (10%)

4 (20%)

Card not

present

Card skimming Physical

attacks to ATMs

Card trapping

Number of

Banks that

have

experienced

each type of

fraud

1 - Includes phishing, stolen cards, clone cards and pin thefts, pin compromise, tampering with the post card (application) from the back end and wrong account mapping.

Fraud in Nigeria Banks

20

Major Frauds in Card based Payments in Nigeria

Fraud continues to increase as fraudsters find more innovative ways to hack into payment systems.

• Stolen card

• Counterfeit

• Identity theft

• Card not present (online fraud)

• Card trapping

• Pharming

Problem

• Cloning

• Malware

• BIN attack

• Skimming

• Phishing

• Carding

Not exhaustive

Solution

• Central Card

Transaction

Monitoring

NIBSS’ Contribution

• Working with the

Industry to deploy

the GTMS

21

-Impersonation Look alike frauds

Fake ID Documents

- Instant transfers to accomplice accounts Fraudulent Money transfers to syndicate groups who opened

Bank accounts with false information.

MAJOR FRAUDS OF ACCOUNT BASED PAYMENT IN NIGERIA

Irrefutable KYC

Problem Solution

Not exhaustive


• Working with the Industry

on the Biometric

Identification System

• Deployment of the e-

passport portal

• Deployment of the e-

reference portal

22

-Remote skimming People with NFC readers coming into close contact

- Faulty devices Issuing and acceptance devices not meeting

required standards

MAJOR FRAUDS IN MOBILE/NFC BASED PAYMENT

National Policy Regulations

and specifications on NFC (Catering for Protocol, Platform and

Devices)

Problem Solution

Not exhaustive


-Coordinating the industry in the

formulation of NFC Standards for Nigeria.

23

-Pilfering

- Late counting of bulk funds

-Robbery

MAJOR FRAUDS IN CASH BASED PAYMENT

•A National cash

management system

•Internal control Systems

Problems Solution

Not exhaustive


-Participating in the data management of the

ICMS.

24

Outline

A. INTRODUCTION




25

An industry wide anti-fraud solution for Nigeria

A collaborative Electronic Payments Anti-Fraud Solution for

Nigeria

A collaborative and efficient approach is essential to prevent and detect fraudsters activities in an intolerable world.

Collaborative Electronic

Payments Anti-Fraud Solution

Channels

Input

Output

Input

Output

Input

Output

Input

Output

• Input - Historical data

- Information from acquires’ processing systems

- Information from issuers’ processing systems

• Processing - Rules

- Behaviour

- Pattern

- Predictive and trends

• Output - Historical data

- Alerts

- Fraud preventive actions

- Fraud blocking actions

- Awareness

How it works?

@


Collaborative anti-fraud functionality overview (1/3)

26

ProposedS anti-fraud system incorporates a powerful prevention and detection engine, complemented by a dedicated/specialized fraud team,

delivers maximum efficiency.

• Real-time fraud monitoring

Detect potential fraud incidents by

analyzing in a real time mode the

transaction records.

• Configurability

The alerts generation is based on a

rule system and comparative behavior

analysis.

• Multiple Levels of Analysis

Restrain the impact and extension of

fraud incidents at several levels, e.g.

merchants, payment terminals (ATM

or POS), cards and transaction types.

• Future Proof

Continuously feed a knowledge data

base on potential fraud incidents.

Major characteristics

Collaborative

anti-fraud

system

The industry anti-fraud system shall provide a powerful online monitoring solution and will allow NIBSS to provide periodic industry wide fraud

transaction activity reports to stakeholders.


Anti-fraud oversight reporting capabilities (2/3)

27

Online Reporting generation

Bank X

Bank Y

Bank W

Bank Z

Fraud exposure (by region) Bank tracking

Internet transactions anti-fraud scoring (daily view)

BIN NO. xxxxxxx

Transaction Type Fraud Score

ATM withdrawal 76,3%

POS purchase 87%

ATM automated

deposit

2%

Internet purchases 67%

BIN Tracking (by issuer) Main Fraud types by regions

Fraud type Region

% of all

transactions

performed

Card Not Present

Region 1 2%

Skimming Region 2 0,05%

Lost/Stolen Region 1 1%

Cash trapping Region 3 3%

Illustrative screen and data Online information is

permanently available in

several types of terminals.

On going

transactions

Historical data

On going

transactions

Historical data

28


Practical examples of collaborative anti-fraud (3/3)

Fraudulent use of

card data in

foreign countries

(e.g.USA)

Use of

compromised

transaction

source

(e.g. ATM)

1

2

Collaborative

Anti-fraud

system • Detection of

behavior

deviation.

• Detection of

fraudulent

transactions.

Collaborative

Anti-fraud

system

• Identification of

fraudulent

transactions

• Identification of

point of

compromise

• Identification and

notification of all

potential affected

customers,

preventing fraud

Abnormal rate of transactions

during a period of time from a

particular place

Compromised

terminal

29

Outline

A. INTRODUCTION




30

SUMMARY OF VALUE ADDED SERVICES FOR FINANCIAL SYSTEM

Significant progress are being made on all the schemes highlighted above.

Championing standards on payments system based on

international best practices through the development of:

Anti-fraud portal

Integration to proposed Biometric Identification System for

bank customers

Electronic Reference Verification portal

Electronic Passport Verification portal for Banks

Single point of connection to all Banks for any new

payment schemes

ICMS: Data Management

31

INTERNATIONAL GATEWAY

NIBSS through the NCS offer avenue for all international

switches to be integrated to the Nigeria payments system

A veritable avenue for delivering value for ECOWAS

Regional Payment Settlement System

ECOWAS consultants already partnering with NIBSS on project

BIOMETRIC IDENTIFICATION SYSTEM

- NIBSS Participating in the

establishment of an industry

Biometric Identification System.

- NIBSS has deployed the e-

passport portal to verify

customers’ International Passport

(Drivers’ License on the way)

- NIBSS has deployed the e-

reference portal to enhance the

reference submission between

banks.

Centralized Biometric Identification:

A critical requirement for customer identification and fraud mitigation

EFFECTIVE KYC (Account Based)

33

NIBSS is pioneering industry wide initiatives to curb fraud in the Nigeria financial system

Log on to http://efraud.nibss-plc.com:8082/

COMPLETE AND ACCURATE REPORTING OF FRAUD

Deployment of the e-

fraud portal for

reporting and collation

of fraud data in real

time.

Take Away

What the industry HAS today

• NIBSS CTMS sits at the centre of all POS transactions today

• NIBSS NCS sits at the centre of EFT transactions among banks today

• NIBSS NACS sits at the centre of all cheque clearing today

• NIBSS MPO-Hub sits at the centre of all mobile phone payments today

• …….And with the assistance of the CBN, NIBSS is watching out for all.

34

35

Fraud Management Strategy: Next Steps

• Active utilization of KYC products and portals

by the industry with the support of CBN

•Definition of KPIs for the GTMS - National Anti-fraud Committees meeting in Uyo for 15th-19th of July

•Firming up on laws and liability shift - Case study of MTN and ABSA in south Africa (Nashua Mobile vs Pale CC)

•Deployment of the GTMS Solution

- Agree an implementation framework for deployment

36

Nigeria Inter-Bank Settlement System Plc

… Improving the Nigeria Payments System

1230b Ahmadu Bello Way Victoria Island,

Lagos, Nigeria

Tel: +234 1 2716071-4

www.nibss-plc.com

THANK YOU