Nigeria’s e-commerce industry, once hailed as a promising frontier of economic growth, is now grappling with a growing menace: fraud. Industry stakeholders have voiced their concerns, pointing out that the prevalence of fraudulent activities is eroding confidence and hindering the sector’s development.
In a recent statement, Henry Owolabi, the Country Manager for DPO Pay, a leading pan-African payment service provider, shed light on the complex challenge posed by fraud. He revealed that the local economy suffers losses amounting to hundreds of millions of US dollars each year due to fraudulent schemes. The implications for the e-commerce sector are significant, as both merchants and consumers become increasingly wary of engaging in online transactions.
Owolabi emphasized the detrimental impact of fraud on the industry’s growth trajectory. Merchants face chargebacks, incurring financial losses, while consumers worry about sharing their card details, fearing potential compromises and unauthorized access to their accounts. Startlingly, research conducted by DPO Pay indicates that nearly 60 percent of users prefer pay-on-delivery options over online payments, highlighting the loss of confidence in existing payment systems.
The consequences of rising fraud rates are far-reaching. Nigeria’s population, once eager to embrace the convenience of online shopping, has now become cautious and hesitant. Owolabi’s company found that users perceive e-commerce as a high-risk endeavor, leading to reduced sales and stifled growth potential for new merchants. The absence of trust in the payment ecosystem has resulted in an environment where online sales occur but with suboptimal conditions, depriving users of a seamless customer experience.
Adelola Agbebiy, the Managing Director of Network International, Nigeria, emphasized the urgent need for payment service providers and their technology partners to take proactive measures to ensure the safety of merchants and consumers. Implementing real-time risk monitors, specialist risk teams, smart pattern identification, real-time payment confirmation, and round-the-clock fraud monitoring are crucial steps towards bolstering trust and combatting fraud.
A 2021 fraud report by the Nigeria Inter-Bank Settlement System (NIBSS) revealed a startling increase of 187 percent in overall fraud attempts between 2019 and 2020. Web-based fraud accounted for 47 percent, followed by mobile (36 percent), ATM terminals (9 percent), and point-of-sale (POS) terminals (7 percent). The report serves as a stark reminder of the evolving tactics employed by fraudsters, requiring heightened vigilance from the Nigerian public.
The rising tide of fraud in Nigeria’s e-commerce industry demands immediate attention and collaborative action from all stakeholders. Failure to address this issue effectively will continue to undermine the sector’s growth potential, impeding economic progress and stifling opportunities for budding entrepreneurs. Restoring confidence in the e-commerce ecosystem should be a top priority, ensuring that Nigerians can enjoy the benefits of secure and seamless online transactions.
