Although unbanked or underbanked people across Africa have begun to be included in the digital finance system, with over 180 million mobile money accounts in use across the continent in 2021, Mobile fraud is estimated to cost Africans $4 billion every year; Kenya, South Africa, and Cameroon top the list of countries where this type of harm is most prevalent.
The use of digital finance has demonstrably bolstered individuals’ resilience against shocks and increased access to channels for savings and credit. But by entering the digital finance system, individuals put themselves at risk of abuse and malicious exploitation.
In many countries, the costs of fraud in DFS are borne not just by the financial institutions but also by individuals.
In Nigeria, where over 40 million people live in rural areas without basic banking services, POS merchants can be critical enablers to increase access to finance because they reach areas traditional banks often do not. But by using this POS terminal to participate in the digital economy, Aaliyah had put herself at risk. Her bank didn’t suffer the loss—she did. While the theft of a relatively small sum might seem inconsequential, for those living in poverty, this consequence of digital financial inclusion can be ruinous.
For instance, Aaliyah, a customer in Nigeria, used a poorly protected point-of-sale (POS) terminal, which led to a fraudulent deduction that depleted her savings account.
These harms affect all users, but they are especially devastating for vulnerable or marginalized groups. Although the fraction of losses borne by vulnerable individuals is small compared to institution-scale security breaches, the impact of losing a day’s or week’s wages is anything but small for an individual who lives day-to-day.
In Kenya, for example, a consumer protection study found that it was not uncommon for DFS fraud to be perceived as causing significant losses, frequently surpassing a day’s wages.
In Uganda, low-income women and those living in rural communities were found to be most impacted by risks arising from DFS.
Challenges faced by many marginalized groups—such as lower levels of digital financial skills and literacy or less agency to seek redress when harms occur—contribute to their disproportionate burden.
Marginalised groups are not only impacted differently by DFS-borne harm; they are also increasingly targeted for online fraud and financial abuse or exploitation.
Digital technology multiplies the attack surface available to malicious actors, making so-called smaller-scale criminal activity more lucrative. Consequently, this type of fraud has grown significantly in recent years.
For hundreds of millions of people across the African continent, the capacity to rebound from attacks and continue to safely participate in the digital economy is crucial.
Digital technologies can improve individuals’ access to critical services and their ability to maintain their livelihood. These technologies can also help individuals rebound from environmental stressors or humanitarian disasters. As such, maintaining the cybersecurity and cyber resilience of those engaging with the digital economy must be at the forefront of the development agenda.
In Ghana, the public lacked sufficient awareness of how a new tax on electronic financial transactions, known as the e-levy, would be collected. Criminals exploited these widespread misunderstandings to convince customers to hand over account information to address fraudulent “tax” charges.
For example, data protection measures perceived as sufficient by some might not offer the degree of privacy a woman needs to feel secure in sharing details (such as home address) that could result in her being harassed or physically harmed. And because women often face multiple challenges simultaneously, such as poor digital or financial literacy, lack of access or account ownership, and limited autonomy in financial transactions, they are often overrepresented in high-risk groups.
Financial Sector Deepening Kenya reported that nearly half of mobile money users in Kenya lost money in 2021, primarily through phone fraud, with a quarter unable to recover the funds.