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Industry experts have emphasized the need for artificial intelligence (AI) adoption to enhance fraud detection and cybersecurity in Nigeria’s financial sector.
Speaking on the transformative impact of AI, Tope Dare, former Executive Director of e-Business and Infrastructure at Inlaks Computers Limited and a board member of CitiData Centre Ltd., highlighted AI’s role in detecting fraudulent activities before they escalate.
AI’s Growing Influence in Banking
Dare noted that AI is reshaping financial services globally by improving transaction speed, fraud detection, and customer service efficiency. However, he pointed out that while AI-driven fraud detection systems can analyze transaction patterns and flag suspicious activities in real-time, they are not infallible.
“Cybercriminals are getting more sophisticated, but AI-powered fraud detection systems help financial institutions stay one step ahead. However, misinterpretations and biases in AI models can sometimes lead to unintended consequences,” Dare warned.
Citing a real-world example, he recounted how a foreign bank deactivated a Nigerian visitor’s account after a single transaction in Lagos, with AI misinterpreting the activity as suspicious. This underscores the need for a balanced approach that combines AI with human oversight to avoid errors that could inconvenience customers.
AI-Driven Banking Services: Benefits and Risks
Dare also praised the impact of AI-powered chatbots such as eBanqo, which have revolutionized banking by offering round-the-clock customer support. These AI solutions handle tasks such as balance inquiries, funds transfers, and loan processing within seconds.
However, he raised concerns about privacy risks and potential discrimination in AI-driven decision-making:
- AI models require vast amounts of personal data, making them prime targets for cybercriminals.
- If trained on biased data, AI may discriminate against certain demographics, affecting loan approvals and financial services access.
“AI is here to stay, and its role in banking will only expand. However, banks must balance automation with human oversight. The best approach is a hybrid model, where AI manages routine tasks while human experts handle complex financial concerns,” Dare advised.
Regulatory Push for AI in Financial Fraud Prevention
At the FITC Risk Round Table, themed ‘Financial System Stability: Leveraging AI for Financial Fraud Detection and Regulations,’ the Chief Executive Officer of FITC, Dr. Chizor Malize, underscored the urgency of AI adoption in financial security.
Malize highlighted FITC’s efforts in collaborating with regulators and industry leaders to develop AI-driven cybersecurity frameworks and predictive risk management tools.
“With financial fraud on the rise, leveraging AI is crucial to mitigate risks and ensure financial system stability. FITC is actively training organizations to integrate AI into risk simulations, enabling them to anticipate, mitigate, and manage fraud risks effectively,” she stated.
Alarming Rise in Financial Fraud Cases
The Chief Executive Officer of the Nigeria Deposit Insurance Corporation (NDIC), Bello Hassan, represented by Amal Haruna, Director of Enterprise Risk Management at NDIC, also acknowledged the increasing sophistication of financial fraud.
Fraud cases—including payment fraud, insider collusion, account takeovers, identity theft, and money laundering—are escalating across all banking platforms.
A report by the Financial Institutions Training Centre (FITC) revealed a:
- 50% increase in fraud-related financial losses
- 100% surge in digital fraud incidents between Q1 and Q3 of 2024
This trend has placed immense pressure on Nigerian financial institutions to adopt AI-driven security solutions to combat the rising threat of cyber fraud.
As the financial sector continues to evolve digitally, experts agree that AI adoption, combined with strong regulatory frameworks and human oversight, will be critical in fortifying Nigeria’s financial ecosystem against fraud.
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