Fraud Surges as Online Transactions Gain Traction

TransUnion readies with ID Verification Solution


As growing numbers of consumers and businesses transact online, one of the biggest obstacles to the mass uptake of digital solutions will be security, said Kabelo Ramaselwana, CEO at TransUnion Botswana.

Citing TransUnion’s quarterly analysis of global online fraud trends, Ramaselwana said the telecommunications, e-commerce and financial services industries have been increasingly targeted by online fraud, with the number of suspected fraudulent digital transactions increasing by 5 percent between January and April 2020. This was during the COVID-19 pandemic.

TransUnion identified more than 100 million suspected fraudulent transactions globally between March 11 and April 28 alone. While there is no data to use in gauging fraudulent activities in Botswana, Ramaselwana said they are not as high as in other African countries. However, he noted, there is an upsurge in online transactions that calls for beefing up security.

“This will mean banks and businesses will need to deploy robust identity verification and fraud detection tools to manage their risks and avoid losses at a time when demand for credit is growing,” he told The Botswana Gazette.“At the same time, they must ensure a smooth customer experience that does not alienate the customer before they have even on-boarded.”
“Now that even more transactions have shifted online, fraudsters are trying to take advantage and companies must adapt. Lenders and businesses need to know exactly who they are dealing with and how to protect their genuine customers from fraudulent activities. The businesses that come out on top will be those leveraging fraud prevention tools that provide great detection rates and the ability to open accounts online in an easy, personalised way.”

Ramaselwana said rather than asking customers to manually enter their personal information, for example, ID documents can be validated online and the information used to pre-fill an application. Once the ID is thus established, the next step is effective ID Verification to detect and prevent fraud.

Ramaselwana emphasized that digital transactions carry an increased risk of fraud that businesses need to address through a multi-layered fraud strategy, including assessing risk of digital signals like device, email, phone and behaviour, according to him. “After ID management and fraud risk and prevention steps are taken, the final steps in a seamless on boarding experience include assessing the consumer’s ability to pay, based on actual income and credit history,” he said.

The TransUnion CEO noted that COVID-19 has put immense pressure on African financial institutions to transform digitally. To do this, he added, they will need access to the most comprehensive set of offline and online data assets. “Providing a truly seamless onboarding process requires up-to-date data sourced from credible data sources like credit agencies, government agencies, telcos and utility providers,” said Ramaselwana. “This is where information providers like TransUnion are playing an increasing role in driving digital transformation, access to credit and financial inclusion.”

With these new trends, continuous sharing of data in the market as a strategy to mitigate against fraud and risk management will be of great importance too going forward.
According to Ramaselwana, cashless solutions like mobile lending and digital payments were already growing rapidly on the continent even before the COVID-19 pandemic struck. He spoke of an imminent scenario where the effects of COVID-19 on society has created permanent changes in the way Africans use cards and cash, creating both opportunities and challenges for financial institutions.

“Even in 2020, millions of people across sub-Saharan Africa still pay their bills and send money each month by drawing cash and physically going to a retailer or a bank to make payment or to receive grant payments,” he observed. “But their safety concerns now mean they don’t want to make physical payments any more, which means banks and fin-techs will have to rapidly roll out safer, contact-free payment methods.”

As markets prepare for life beyond the pandemic, digital transformation is becoming a key strategic initiative for financial institutions across both digital and traditional channels. From March to July, Ramaselwana noted, most banks reduced banking costs on app based and digital transactions. These changes, he added, even temporary ones, are increasingly being supported by economic policy changes from regulators and national banks to further digitization agendas.