Mr. Nironjan Roy, a Toronto-based banker, found himself entangled in a disconcerting saga of mobile financial service (MFS) transactions, casting a glaring crimson hue on the country's aspirations toward a cashless future. In his recount from the previous year, a pressing need arose: BDT 20,000 was urgently required for a distressed relative. The traditional route from Canada promised a tedious seven-day wait. Desperation led him to implore a friend in Dhaka for immediate assistance, according to his view published in a daily.
Assurances came swiftly, promising the transfer within hours through bKash. Yet, scepticism gnawed at Roy's mind. How could such a sizable sum traverse non-banking channels? His perception, steeped in the practices of technologically advanced societies, dictated that such transactions were reserved for smaller sums, likely under BDT 5,000. To his bewilderment, confirmation arrived within hours - the funds securely landed in his relative's hands. However, Roy, seasoned in the intricacies of banking, couldn't dismiss a lingering concern. While the system showcased remarkable efficiency, he couldn't shake the sense that sometimes, the allure of efficiency might mask unforeseen risks, urging caution on the path to a cashless society.
Easy and quick service-providing companies are inherently susceptible to fraud risks. Hence, ensuring fraud protection stands as a primary requisite for facilitating swift monetary transactions. Customers of mobile financial service (MFS) providers frequently fall prey to deception, as fraudsters continually devise new tactics to siphon funds from their mobile banking accounts. These perpetrators target not only technologically illiterate individuals but also highly educated figures like AHM Quamruzzaman, Deputy Director (DD) of the Divisional Public Library, who fell victim to a scam, losing Tk 55,000 from his bKash account in September. Recently, the Detective Branch (DB) of the Police apprehended three members of a fraud syndicate operating in the Mohammadpur area of the capital. According to Md Abdul Ahad, Deputy Commissioner of the Wari Division of the Detective Branch, these bKash fraudsters operate with meticulous organization and planning.
So, industry experts see that the rising incidents of fraud in the digital payment space are sparking a gloomy signal for the country’s journey towards a cashless society.
When the world is moving toward a “less-cash” society, Asia is leading the queue and Bangladesh is moving fast driven by its robust mobile financial services (MFS) under a conducive regulatory environment. Bangladesh Bank data shows that the average daily transaction of MFS operators has crossed Tk3200 core and its volume shows a growing trend. But the path is not a bed of roses. When good things happen slowly then bad things happen quickly. But the role of MFS players is inadequate as most of them are engaged in fighting each other to grab the market share leaving their innocent users- mostly poor and low-income people in the hands of fraudsters who are smart, talented and clever.
Industry experts have already expressed grave concern over the incidents of mobile banking fraud are rising alarmingly across the globe even in developed markets which prompted the UK to decide to ban all cold calls for financial products. India’s Bank of Baroda recently made it simple and easy for its agents to steal money from the accounts of its customers. And some of them did steal 2.2 million rupees ($27,000) from 362 customers, internal audit reports and records of the bank have revealed. The audits come after an expose by The Reporters’ Collective (TRC) and Al Jazeera. According to Reserve Bank of India data, 2,331 fraud cases involving Rs 87 crore were reported by banking entities during the six months as against 1,532 frauds involving Rs 60 crore. In Bangladesh, the situation is no doubt, more worsen as most MFS users are poor people who mostly live in remote areas. Readymade garment workers, small entrepreneurs, and low-income and less-educated people are becoming the victims of the forgery ring. A senior RAB official has said 10-12 cases of extortion using mobile banking services are reported every day, according to reports published in dailies.
MFS customers who are in front of Bangladesh’s journey toward a cashless society are poor and low-income citizens. Rising fraudulent activities may discourage them to shy away from using MFS tools which ultimately will jeopardize the Bangladesh cashless journey. This is high time for all MFS operators to work together to fight fraudsters and educate their consumers…
The government as well as the Bangladesh Bank are promoting this cashless transaction which has ignited a revolutionary journey towards a digital economy for a better and smarter Bangladesh. The central bank has set a target to have 75 per cent of transactions settled digitally by 2027. Keeping it at the forefront, various initiatives have been taken to encourage the use of digital payments in the country. In line with government aspirations, banks and financial institutions have committed themselves to promoting easy, safe, and secure cashless transactions for all. Card offerings, easy-to-use online services, and best-in-class mobile applications have been introduced and revamped to suit newly minted purchasing habits. This diverse range of options gives customers the flexibility to choose what truly fits best. This shift means better, cheaper and faster access to money for people.
However, some recent incidents of fraud, account opening by some mobile financial services (MFS) operators without regulatory compliance, lack of a level playing field and unethical actions by some market players to outflank competitors lead to inadequate effective measures to educate consumers. This is no doubt, a window of opportunity for mobile banking fraudsters to steal money from the pockets of innocent users- a red alert on the journey. But fraudulent activities, in whatever form or shape, are bad for the country’s MFS industry growth and a stumbling block in the way of a cashless journey. Lump was at the base when a new entity entered the market with the government’s support to do MFS business without regulations. A large number of MFS accounts were without regulatory compliance set by regulation to protect against fraud, ensure consumer rights and also stop money laundering and financing of terrorist groups. Besides, some operators have opened MFS accounts based on mobile user lists supplied by mobile network operators, which may allow fraudsters and hackers to grab the money of genuine recipients.
To mitigate risks and fraud in mobile banking, strict enforcement of the regulation and regular supervision is urgent. Here KYC comes to the fore. After thorough research, Bangladesh Bank issued a guideline for operations of mobile financial services and introduced KYC protocol in line with the Financial Action Task Force (FATF) where e-KYC is mandatory for all MFS providers. KYC or 'know your customer is a mandatory verification procedure carried out by any banks, financial institutions, and other organisations to minimise illegal activities like money laundering. Banks follow this process while opening accounts and periodically update the same. If a KYC document is not in place, any person can do any financial crime through the acquired MFS account.
Seasoned bankers say any banking account without proper validation of customers through face-to-face interactions is risky and a big challenge for mobile banking. Therefore, regulators across the globe have imposed on MFS providers to identify and validate their customers properly through face-to-face interactions and follow KYC/e-KYC rules to avoid any deviations. One of the major pillars on which this MFS industry is standing is the simplified KYC introduced by Bangladesh Bank and the BFIU. As per BB guidelines, banks and MFS operators are required to periodically update the KYC records. This is a part of the banks due diligence framework.
More consumers are now preferring to use mobile payments tools when paying other people as opposed to cash. Millions of young consumers are avoiding cash and using cards to buy food in restaurants and shopping malls, which is pushing forward the Bangladesh's journey towards a cashless nation. But rising fraudulent activities may discourage them to shy away from using MFS tools which ultimately will jeopardize the Bangladesh cashless journey.
(The writer is the Editor of THE BANGLADESH EXPRESS and the Chairman of Bangladesh Journalists’ Foundation For Consumers & Investors-BJFCI).
