The changing nature of U.S. card payment fraud: industry and public policy options

As credit and debit card payments have become the primary payment instrument in retail transactions, awareness of identity theft and concerns over the safety of payments has increased. Traditional forms of card payment fraud are still an important threat, but fraud resulting from unauthorized access to payment data appears to be rising, and we are only beginning to get a sense of the dimensions of the problem. ; Thus far, the role of public policy has been to encourage the card payment industry to limit fraud by developing its own standards and procedures. Whether this policy stance is sufficient depends on the effectiveness of industry efforts to limit fraud in light of the dramatic shift toward card payments. ; Sullivan provides an overview of card payment fraud in the United States. He develops a preliminary estimate of the rate of U.S. card payment fraud and suggests that such fraud is higher than in several other countries for which data are available. The U.S. payment industry is taking steps to combat payment fraud, but progress has been slowed by conflicts of interest, inadequate incentives, and lack of coordination. Thus, policymakers should monitor the card payment industry to see if it better coordinates security efforts, and if not, consider actions to help overcome barriers to effective development of security.

A Comparative Analysis of Civil Liability in Electronic Payment Systems Under the U.S. and Nigerian Laws

One controversial legal issue in relation to fraud in e-banking is how the losses arising from flaws in electronic payment systems would be distributed between the consumer and financial institution. The paper examines the scope of liability of the consumer and bank for unauthorised Electronic Funds Transfer (EFT) under the U.S. and Nigeria laws. Allocation of liability where a consumer is in the picture is, regulated by legal rules in the U.S. The Central Bank of Nigeria regulates e-payment liability issues through guidelines. The protection accorded the consumer by the U.S. EFT Act is wider and financial institutions share more liability than the consumer as opposed to the situation in Nigeria. Under the Nigerian law, consumers’ liability is unlimited.  Legal improvements are needed to protect the consumer as the weaker party within the context of electronic payment transfer. Keywords: liability, risk, consumer, electronic payment system, Electronic funds transfer DOI: 10.7176/JLPG/82-0

An Examination of E-Banking Fraud Prevention and Detection in Nigerian Banks

E-banking offers a number of advantages to financial institutions, including convenience in terms of time and money. However, criminal activities in the information age have changed the way banking operations are performed. This has made e-banking an area of interest. The growth of cybercrime – particularly hacking, identity theft, phishing, Trojans, service denial attacks and account takeover– has created several challenges for financial institutions, especially regarding how they protect their assets and prevent their customers from becoming victims of cyber fraud. These criminal activities have remained prevalent due to certain features of cyber, such as the borderless nature of the internet and the continuous growth of the computer networks. Following these identified challenges for financial institutions, this study examines e-banking fraud prevention and detection in the Nigerian banking sector; particularly the current nature, impacts, contributing factors, and prevention and detection mechanisms of e-banking fraud in Nigerian banking institutions. This study adopts mixed research methods with the aid of descriptive and inferential analysis, which comprised exploratory factor analysis (EFA) and confirmatory factor analysis (CFA) for the quantitative data analysis, whilst thematic analysis was used for the qualitative data analysis. The theoretical framework was informed by Routine Activity Theory (RAT) and Fraud Management Lifecycle Theory (FMLT). The findings show that the factors contributing to the increase in e-banking fraud in Nigeria include ineffective banking operations, internal control issues, lack of customer awareness and bank staff training and education, inadequate infrastructure, presence of sophisticated technological tools in the hands of fraudsters, negligence of banks’ customers concerning their e-banking account devices, lack of compliance with the banking rules and regulations, and ineffective legal procedure and law enforcement. In addition, the enforcement of rules and regulations in relation to the prosecution of financial fraudsters has been passive in Nigeria. Moreover, the findings also show that the activities of each stage of fraud management lifecycle theory are interdependent and have a collective and considerable influence on combating e-banking fraud. The results of the findings confirm that routine activity theory is a real-world theoretical framework while applied to e-banking fraud. Also, from the analysis of the findings, this research offers a new model for e-banking fraud prevention and detection within the Nigerian banking sector. This new model confirms that to have perfect prevention and detection of e-banking fraud, there must be a presence of technological mechanisms, fraud monitoring, effective internal controls, customer complaints, whistle-blowing, surveillance mechanisms, staff-customer awareness and education, legal and judicial controls, institutional synergy mechanisms of in the banking systems. Finally, the findings from the analyses of this study have some significant implications; not only for academic researchers or scholars and accounting practitioners, but also for policymakers in the financial institutions and anti-fraud agencies in both the private and public sectors

Awareness of BVN, SIM swap and clone frauds: Methods and controls

Bank Verification Number (BVN), SIM swap and SIM clone fraud have become an issue of great concern in Nigeria. It has left banking and telecommunications offices trudging with complaints and many bank customers in pains. The Federal Government and the Central Bank of Nigeria (CBN) introduced the BVN to prevent corruption, provide a transparent system of payment and effective account monitoring, and to uniquely identify bank customers in order to eliminate any incidence of fraud. Even as banks unilaterally implement this measure, fraudsters are continually devising means of defrauding bank customers of their possessions and evade detection. In this paper, the authors created an awareness on how bank customers are deceived into disclosing their financial details, the methods used in obtaining data for SIM swap and SIM clone, and to sensitize the public on how to prevent unauthorized access to their treasured details

Body language, security and e-commerce

Security is becoming an increasingly more important concern both at the desktop level and at the network level. This article discusses several approaches to authenticating individuals through the use of biometric devices. While libraries might not implement such devices, they may appear in the near future of desktop computing, particularly for access to institutional computers or for access to sensitive information. Other approaches to computer security focus on protecting the contents of electronic transmissions and verification of individual users. After a brief overview of encryption technologies, the article examines public-key cryptography which is getting a lot of attention in the business world in what is called public key infrastructure. It also examines other efforts, such as IBM’s Cryptolope, the Secure Sockets Layer of Web browsers, and Digital Certificates and Signatures. Secure electronic transmissions are an important condition for conducting business on the Net. These business transactions are not limited to purchase orders, invoices, and contracts. This could become an important tool for information vendors and publishers to control access to the electronic resources they license. As license negotiators and contract administrators, librarians need to be aware of what is happening in these new technologies and the impact that will have on their operations

Better Than Cash? Global Proliferation of Debit and Prepaid Cards and Consumer Protection Policy

A global deluge of debit cards and prepaid cards – payment cards that do not require consumers to qualify for credit – is rapidly making electronic payment systems accessible to much of the world’s population that previously paid in cash for goods and services. The global proliferation of payment cards is fraught with both risk and promise for consumers. The billions of people of low to moderate incomes who are being hurled from a cash economy into the era of electronic payments in emerging economies by the proliferation of debit and prepaid cards are particularly vulnerable to abuses by banks and merchants. Unregulated private lawmaking by payment card associations and card issuers will not ensure that consumers are treated fairly, due to their countervailing incentives to attract merchants into their payment networks. Technological solutions promote efficiency and limit abuse, but cannot ensure fair resolution of consumer-merchant disputes. Payment card associations such as Visa and MasterCard operate chargeback systems for resolving disputes, but chargeback systems cannot function in cash economies without merchants’ consent, because cash transactions are usually anonymous, evidenced at most by a receipt, and do not involve an intermediary. However, while the lack of anonymity inherent in the use of payment cards entails risk for consumer privacy, it also makes possible greater transparency in payment systems. As billions of vulnerable consumers become connected to electronic payment systems, chargeback systems become a possible means of protecting them from merchant misconduct. Moreover, this lack of anonymity makes possible new ways of protecting consumers, such as disclosure to consumers of outcomes of the Visa and MasterCard chargeback systems through merchant ratings such as those posted on eBay. There is a risk that nations with emerging economies will uncritically emulate regimes of consumer protection adopted in the United States and Europe. These regimes in many respects lack a consistent conceptual foundation and fail to address problems, such as bank fees, access to banking services and payment system insolvency, that are poorly addressed in developed countries if they are addressed at all. For example, debit and prepaid card transactions are both a convenient means of obtaining cash and a substitute for cash, but this does not justify denying chargeback rights to consumers who use debit and prepaid cards, as if they had paid in cash. Prior scholarship on payment cards has suffered from the assumption that American use of credit cards is normative. This article demonstrates that it is a global anomaly; most consumers worldwide use payment cards for convenience rather than a source of long-term credit, and that is why debit cards have become popular so quickly. Moreover, fees and charges imposed on consumers for payment card services are one of the most prolific sources of consumer complaints. Fee regulation should be regarded as a legitimate part of payments law in scholarship on the subject, and should not be ignored in establishing a regulatory system to govern debit and prepaid cards

Regulating Electronic Money in Small-Value Payment Systems: Telecommunications Law as a Regulatory Model

A smart card, or stored value card, is a credit card-sized payment mechanism with an embedded integrated circuit chip. Current technology allows value to be placed on the card through an ATM terminal, a telephone equipped with a card reader, or a personal computer equipped with a card reader. The suitability of the card for small-value, high-volume transactions indicates that stored value cards could, to a large extent, replace currency transactions. Existing laws are not tailored to deal with the nature of transactions involving stored value cards, nor do they address nonbank card issuers. The integration of telecommunications and financial services strains traditional regulatory practices in both areas. Regulation of electronic money should be structured to eliminate barriers to competition and allow for innovation while creating a level playing field for both financial and nonfinancial issuers