Mobile banking fraud

PHOTO: pulsosocial. com

A number of recent news reports have chronicled the use of mobile money transfer services by miscreants to carry out extortionist activities. Fraudulent activities, in whatever form or shape, are bad. At the same time, we need to take things into perspective. Not doing so may result in raising an alarm in people's minds. That would be harmful for any product or service, but especially for a service that has the potential for broader socio-economic benefits while it is in the infant stage of development.
Let us begin with some facts. Fact 1: On average, Tk.125 crore changes hands through mobile banking, a news report said. Although this is not the actual transaction volume (since a typical transaction involves cashing in at one end and cashing out at another, and therefore the number would be smaller), but for the purpose of this article, let us take this number at face value. Fact 2: A recent pi Strategy Consulting study estimated that the average value of a mobile banking transaction to be about Tk.4,000. So, if Tk.125 crore is indeed transacted in a day, there are a little over 300,000 transactions taking place each day. Fact 3: The abovementioned report cited a senior Rab official saying that 10-12 cases of extortion using mobile banking services are reported every day. Let us also consider the point that not all cases are reported, and assume that on average 25% of the actual cases are indeed reported. So, we are looking at about 50 occurrences of these fraudulent activities per day.
What we have here then is a fraud prevalence rate of 50 out of 300,000 per day, which is 0.016%. Translation: for every 5,000 mobile banking transactions, at most 1 may be fraudulent.
Every system has flaws. And certain people will always find ways to use the flaws in a system for ill intentions. Aircrafts have been flown into buildings to kill thousands. Traditional banking systems have been used to embezzle funds. Almost every religion in the world has been misinterpreted at one time or another by certain groups of people for ill intent.
The good thing about technology is that it allows us to do things quicker, cheaper, more efficiently, and with fewer people. The bad thing about technology is that it allows miscreants to do things quicker, cheaper, more efficiently, and with fewer people. And thus, when ill intent is coupled with technology, we unfortunately have more potent ills. Sophisticated structural modeling technology is thought to have been used by the 9/11 terrorists to unleash the damage they did. In the banking sector, the recent ATM card fraud cases were largely possible because of technology. And who can forget the Photo-shopped image of Sayeedi on the moon that was intended to misguide the opinion of a certain faction of the public (fortunately, only briefly).
For all the examples cited, and in most other cases as well, when ill-use is reported, people are able to take things into perspective. The aircraft industry has existed for over 100 years, the banking industry for longer, and religion for thousands of years. When we hear about ill-use in such contexts, we are able to also relate to many, many good things those same domains brought to our lives. And hence, we don't lose faith in flying or banking or religion because a few miscreants used it for ill intent.That is not the case for mobile banking. It is a new domain that is just beginning to take off. Globally, the "oldest" successful deployment, M-Pesa in Kenya, began its journey in 2007 -- merely six years ago. In Bangladesh, the first deployment, DBBL Mobile Banking, was launched in 2011 -- about two years ago. This domain is truly in an infant stage both globally and locally. Like all (human) infants, this sector needs a lot of nurturing in the early days, even when it falters, perhaps especially when it falters. If the criticism is too strong, it may have an unintended effect of instigating an exaggerated level of alarm. And when incidences of ill-use are reported (and they should be), perhaps a more balanced view that takes things into perspective would serve a better purpose.
I wonder what the fate of flying would have been if in the early 1900's the newspapers periodically reported on the various flaws of aircrafts while the innovators were still ironing out the kinks.

The writer is Managing Partner at pi Strategy Consulting.