Adeshina, in a chat with Technext, insisted that the accusations were unfair as fraud happens everywhere in the financial ecosystem...
In the wake of several allegations that many Nigerian fintech companies are reluctant enablers of fraud within the Nigerian pavement system, Co-Founder and CEO of Trade Lenda, Adeshina Adewumi has debunked allegations that fintechs are enabling fraud. On the contrary, the fintech chief believes that the incidence of fraud has been brought to the limelight as a result of the activities of fintech companies which contrasts the culture of traditional banks which typically hide them.
Recall that last week, a leading Nigerian business platform reported an exclusive story of a N72 billion fraud that is currently impacting the Nigerian payment space. According to the report, fintech companies were allegedly at the heart of the fraud epidemic due to poor user verification and the lack of a rigorous internal control operation process.
In the defence of fintech companies, Adeshina, in a chat with Technext, insisted that the accusations were unfair as fraud happens everywhere in the financial ecosystem. He noted that while traditional banks have mastered the art of hiding these cases when they happen, the proliferation of fintechs has made these fraud cases more obvious.
“Increased cybersecurity issues are across the globe. Had fintech contributed to it, yes, but again, fraud and other issues have been there right from time. Fintechs have only made the public more aware that these things happen. Back in the days when fraud happened with banks, they covered it up. Today, with fintech, information is more liberal,” he said.
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Debunking fintech enabled fraud allegations
Per the report, resolving fraud cases can be quite complicated when a fintech company is involved. This is because while one bank could quickly call another for resolution, contacting fintechs is quite difficult.
This delay, according to the report, gives the fraudsters ample time to move the stolen money, hence, making it impossible to recover. Therefore, resolving a fraud case involving a fintech usually involves the Central Bank of Nigeria (CBN), something the banks are very averse to.
Another allegation is that the majority of fintech fraud cases go unreported.
Referencing the top 5 fraud cases that make up the N14 billion case, only one, the Flutterwave N2 billion case was from a major fintech player. The rest were traditional banks like Access, Fidelity and FCMB. Shago, a payment platform made up the number, although it was for airtime and bills payment.
Another major accusation is that fintech companies have aggressive shareholders and investors who are more interested in profits than compliance and users’ safety.
“Some stakeholders believe that some fintech companies’ aggressive shareholder expectations may contribute to the problem. Some companies may prioritise profits over necessary security measures to meet these expectations,” the report claims.
Such is the magnitude of these accusations that TechCabal reports that a leading Nigerian bank, Fidelity has blocked funds transfer to the three biggest payments fintechs in Nigeria; Opay, Palmpay and Moniepoint.
Adeshina, while admitting that some fintechs need to improve on their KYC, said that banks are barking up the wrong tree as fintech companies are not the problem. He said fintechs are only trying to bring speed to the financial system, something the traditional banks have not been able to achieve for years.
“Today, the same Fintechs are working to drive collaborations with banks. I personally belong to a group that plays best to hundreds of fintech players and some bank associates working to curb and provide collaborative efforts in reducing frauds and all,” he said.
A recent run of ill luck by Nigerian fintech companies
While fintech companies are credited with the innovative drive that has sped up the average transaction time in the banking space, a consequence of that innovation is akin to the popular saying that “speed kills”. And in recent times, this has been the case with a number of Nigerian fintech companies.
A major example of this is Opay, Nigeria’s biggest financial technology company.
In a video which recently made the rounds, Opay agents were seen protesting against arbitrary withdrawals from their accounts. According to the agents, the withdrawals are unusual, and baseless, and seem to result from fraudulent activities. This video sent panic around the public with Nigerians, many of whom have funds in the company, wondering if the company had been hacked.
Although Opay debunked the matter, stating that the video was an old tape that had just resurfaced, it hasn’t done much to douse the panic.
But it hasn’t been all gloom as some fintechs are also reporting their successful fights against fraud. In a recent chat with Technext, Risevest Co-founder and Head of Operations, Tony disclosed how the company was fighting and successfully defeating a round-tripping syndicate on its platform.
While Rise isn’t a payment platform, its achievement is nonetheless noteworthy.
On his part, Adeshina agreed that fintechs need to improve their KYC which is actually a good way to “flush out the bad eggs” from the user base.
“Fintechs also need to tidy up their KYC. Mostly due to the need for growth, they ignore the basic KYC, which can be used to fish out bad eggs,” he said.
In conclusion
The battle line seems to be drawn between traditional banks and financial technology companies. While the banks seem to believe fintechs are responsible for the proliferation of fraud in the payment system, the fintechs believe fraud has always been there but while the banks successfully conceal it in the name of resolution, fintechs, due to their liberalism, are exposing this fraud.
There ought to be a great deal of synergy between banks and fintechs. But so far a rift seems to be opening up, bolstered by Fidelity Bank’s move to block funds to some of the biggest payment companies. It is left to be seen how the coming days pan out.