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Fraud Prevention 26 Nov 2023

How African Banks Can Spot and Prevent Account Takeover Fraud

Peace Itimi

Director of Marketing

Account takeover fraud has become an increasing concern in Africa, as highlighted in a 2022 report by PwC.  The report reveals a troubling 15% surge in account takeover fraud cases across the continent in 2021. Several factors contribute to this alarming rise, including the widespread adoption of mobile banking and digital payment systems, limited awareness among African consumers regarding account takeover fraud, and the growing sophistication of fraudsters involved in these schemes.

The impact of account takeover fraud extends beyond individual victims, affecting banks and their customers. In 2021 alone, African banks collectively suffered an estimated loss of $1 billion due to this type of fraudulent activity. Customers who fall victim to account takeover may experience substantial financial losses and severe damage to their credit ratings, further exacerbating the impact of this pervasive problem.

This article aims to shed light on the challenges of account takeover fraud in Africa and explore the potential solutions offered by technology tools and authentication methods. By leveraging advanced technologies and robust authentication practices, African banks can enhance their ability to detect and prevent these fraudulent activities, safeguarding the interests of their customers and preserving the integrity of their financial systems.

 

The challenges of account takeover fraud in African banks

Account takeover fraud is a significant concern for African banks, as criminals exploit various factors to gain unauthorised access to victims' bank accounts and assume control. The unique challenges faced by African banks in combating this type of fraud require a closer examination.

African banks rely heavily on manual verification methods, which are unreliable in preventing account takeover fraud. These methods involve manually verifying customers' identities by cross-checking their ID documents, utility bills, and other personal information. However, fraudsters armed with stolen or counterfeit documents can easily deceive these verification techniques, rendering them ineffective and leaving banks vulnerable.

While valuable, traditional prevention methods like two-factor authentication (2FA) and device fingerprinting are not foolproof against determined fraudsters. Social engineering tactics allow criminals to manipulate victims into revealing their 2FA codes, while sophisticated techniques enable them to bypass device fingerprinting altogether. This highlights the need for supplementary measures to strengthen bank security.

Detecting account takeover fraud presents an ongoing challenge as fraudsters continually refine their techniques. Advanced technologies like machine learning and artificial intelligence are now employed by criminals to circumvent security measures and gain unauthorised access to accounts. Keeping up with the latest identity fraud trends and technologies becomes an uphill battle for African banks, necessitating proactive measures to identify and counter emerging threats.

Traditional account takeover prevention methods and their shortcomings

Conventional prevention methods have demonstrated their inadequacy in effectively combating account takeover fraud within African banks. Here are their shortcomings:

1. Manual verification isn't reliable

Manual verification is a common method banks use when utilising strategies to prevent fraud, like account takeover fraud. This method is unreliable, time-consuming and costly, especially in cases where customers are not physically present.

 2. Passwords are easily hacked

Banks employ passwords as another conventional method to enhance security. Customers must create robust passwords to thwart unauthorised access to their accounts. However, passwords are susceptible to hacking, mainly if they are weak or customers reuse them across multiple accounts. Moreover, fraudsters can exploit phishing attacks to deceive customers into disclosing their passwords.

 3. Security questions can be guessed

Banks employ security questions as a preventive measure against account takeover fraud. Customers are required to provide answers to these questions, which should be known only to them. However, security questions can be guessed or obtained through social engineering attacks. Additionally, customers may encounter account lockouts if they forget their answers, further complicating the situation.

4. SMS verification can be intercepted

SMS verification is a method banks use to prevent unauthorised access to customer accounts. Customers receive an SMS with a verification code that they need to enter to access their accounts. 

However, fraudsters can intercept SMS verification using SIM swapping or other techniques. In addition, customers may not receive the SMS if they are in an area with poor network coverage.

Technology solutions to help combat account takeover fraud in African banks

As technology advances, so do the tools available to prevent and detect account takeover fraud. Here are some technological solutions that can help African banks spot and avoid account takeover fraud:

1. Biometrics Authentication 

Biometric traits are unique to individuals, making them difficult to replicate or forge. Unlike passwords, which can be forgotten, stolen, or shared, biometric data is inherent to each person and remains constant. This is why biometric authentication is a powerful method to combat account takeover fraud. It necessitates users to validate their identity using unique biological traits, such as fingerprints or facial patterns, making unauthorised access significantly more challenging. 

Biometric KYC and authentication systems have advanced algorithms that analyse and compare biometric data to identify anomalies and inconsistencies. By cross-referencing biometric information with existing databases, these systems can detect patterns associated with fraudulent activities, such as multiple registrations under different names or attempts to manipulate biometric features. Suspicious activities can be flagged and investigated, preventing fraud before it occurs. In particular, facial recognition has become the preferred biometric method worldwide in recent years.

2. Liveliness Checks

A robust anti-spoof system should back up biometric checks to ensure customer safety and prevent account takeover fraud. With the rise of deep fakes across Africa and globally, liveliness checks add an extra layer of security by ensuring that the biometric traits come from a real person and not from an artificial source like a photo. 

Many apps that leverage liveness detection capture a short video during registration. Others take a quick succession of frames and audio while the user motions. Specialised algorithms then generate a confidence score on whether a human was present. Humans can review results to refine machine learning further.

At Smile ID, we've pioneered face recognition and liveness solutions since 2016. Our patented SmartSelfie™ technology uses 6 AI models backed by daily human reviews labelling thousands of images. These insights strengthen our algorithms over time.

SmartSelfie™ powers both mobile and web solutions with live video analysis. Integrating liveness checks with biometrics, we help ensure customer safety and prevent account takeovers in an increasingly deceptive digital world. 

3. Behavioural Analysis

Behavioural analysis employs machine learning algorithms to scrutinise user behaviour and identify anomalies. By understanding a user's typical behaviour, banks can spot deviations suggesting possible account takeover attempts. For instance, if a user typically logs in from their home computer in South Africa and suddenly logs in from an unfamiliar location, it could raise a red flag.

4. Network Analysis

Network analysis involves scrutinising network traffic to discover suspicious activities. Monitoring network traffic allows banks to identify and react to possible account takeover attempts. For example, suppose an ordinarily inactive account begins transferring large amounts of data. In that case, it may signal that the account has been compromised, and a fraudster is attempting to siphon off funds.

5. Login Analysis

Login analysis involves studying login attempts to detect unusual activity. Banks can identify potential account takeover attempts by closely observing login attempts and take preventative action."

Strategies to prevent account takeover fraud

As an African bank, there are several strategies you can implement to prevent account takeover fraud. Here are some of the most effective ones:

1. Multi-factor authentication (MFA); adding biometrics. 

Implementing multi-factor authentication is one of the most effective ways to prevent account takeover fraud. It involves requiring customers to provide two forms of identification before accessing their accounts. For example, customers may be required to enter their password and a unique code sent to their phone via text message. In addition to traditional two-factor authentication methods, banks can consider using facial recognition technology, such as Smile ID smart-selfie authentication, as a third level.

2. Monitoring for Suspicious Activity

Monitoring for suspicious activity is another effective strategy for preventing account takeover fraud. By monitoring accounts for unusual activity, such as logins from unfamiliar locations or multiple failed login attempts, banks can quickly identify potential fraud and take action to prevent it.

3. Customer Education

Educating customers about the risks of account takeover fraud and how to prevent and protect themselves is an essential strategy for preventing account takeover or identity fraud. Banks can provide resources, such as online tutorials and webinars, to help customers learn how to prevent and identify fraud.

4. Strong password policies

Implementing strong password policies is another effective way to prevent account takeover fraud. Banks can require customers to create strong passwords that include a combination of letters, numbers, and special characters. Additionally, banks can require customers to change their passwords regularly to prevent them from becoming compromised.

5. Fraud Detection Software

Another effective strategy for preventing account takeover fraud is using fraud detection solutions like Smile ID. Smile ID's advanced fraud detection system uses biometric face verification to automatically spot anomalies and prevent fraud more effectively, enhancing security for your bank.

How African banks are using technology to spot and prevent account takeover fraud

Account takeover fraud is a growing threat to the African banking industry, and banks are turning to technology to help them detect and stop it. Here are some examples of how African banks are using tech tools and authentication to spot and avoid takeover account fraud:

 1. Standard Bank South Africa

Standard Bank South Africa implemented a multi-factor authentication system to prevent account takeover fraud. The system requires customers to provide passwords, a one-time PIN, and a fingerprint scan to access their accounts. The bank also uses machine learning algorithms to analyse customer behaviour and detect unusual activity. If the system detects suspicious activity, it triggers an alert to the bank's fraud team, who can investigate further.

You can find details of how Standard Bank South Africa uses MFA to protect its customers here 

2. Ecobank Nigeria

Ecobank Nigeria uses biometric authentication to prevent account takeover fraud. The bank's mobile banking app requires customers to scan their fingerprints to access their accounts. The app also includes a feature allowing customers to report suspicious activity, such as unauthorised transactions or login attempts. The bank's fraud team can then investigate and take action if necessary. You can find detailed information on how Ecobanks protects its customers here 

3. Absa Group Limited

Absa Group Limited uses technology and human expertise to prevent account takeover fraud. The bank's system uses the FICO Falcon Fraud Manager’s machine learning algorithms to analyse customer behaviour in real-time and detect unusual activity. The system also includes a feature allowing customers to report suspicious activity. The bank's fraud team then investigates and takes action if necessary.

4. First National Bank (FNB) South Africa

First National Bank (FNB) South Africa uses a fraud detection system called “Manila” that analyses customer behaviour and detects unusual activity. The system uses machine learning algorithms to identify patterns of behaviour indicative of fraud. If the system detects suspicious activity, it triggers an alert to the bank's fraud team, who can investigate further.

Conclusion

Account takeover fraud seriously threatens African banks and their customers. However, African banks have the means to mitigate this risk through a combination of technological tools and robust authentication methods. Banks must educate their customers about the dangers of account takeover fraud and collaborate closely with law enforcement agencies to track down and prosecute fraudsters.

One noteworthy solution that offers convenience and user-friendliness while seamlessly integrating into existing banking systems is Smile ID. By integrating Smile ID, African banks can prevent account takeover fraud and safeguard their customers' accounts.
 

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