On an everyday basis, we purchase products and services from our basic necessities like food, clothing, payment of bills to airtime and mobile data purchases. To complete these transactions, we have become more reliant on digital banking and mobile money due to their convenience.
With the Covid-19 pandemic, there has been a significant boost to digital banking and mobile money in Uganda, consumers have moved online in considerably larger numbers and this radical transformation continues. According to The Bank of Uganda’s June 2022 Financial Stability Assessment Report, cashless payments have surged, with the value of the internet and mobile banking increasing by 82.8% and 146.1% respectively, while mobile money increased by 46.5%. The volume and value of mobile money and digital banking have had a significant impact on the surge of cashless payments.
Given the radical shift to digital banking and mobile money, a revolution in cyber fraud has been created. As digital channels multiply, so do the avenues that fraudsters might use. According to the Uganda Police Crime Report, in 2020 Ugx 15 Billion was lost through cyber fraud. Currently, fraudsters are tricking consumers into giving out their account details with the most popular scheme claiming to be upgrading their sim cards as a pretext for obtaining personal information. Financial service provider personnel have also been accused of colluding with fraudsters to steal substantial amounts of money from unsuspecting consumers. On the 10th of January 2022, staff of a prominent Ugandan bank were arraigned before the Anti-Corruption Court and charged with conspiracy to defraud, leaving one to wonder, if financial service providers can still be trusted hence giving importance to why we need to understand the relationship between consumers and financial service providers.
The general relationship between financial service providers and the consumer is a contractual one, which begins when a consumer agrees to open an acount. The terms and conditions specify the duties imposed on the financial service provider and the consumer. The financial service provider becomes a debtor of the consumer when they deposit money in their account and the money becomes the property of the financial service provider who can use it as they see fit. The financial service provider is not obliged to tell the consumer how the funds will be used but must repay on demand. A financial institution’s duty of care to its consumers is wide and ranges from protecting a consumer from fraud to ensuring that the financial advice it issues is sound and reliable.
In what was a crucial judicial development On the 18th of July 2022, Hon Justice Stephen Mubiru in the case of Aida Atiku V Centenary Rural Development Bank Limited; while examining the risk of fraud in digital banking laid down the duties owed by financial institutions to consumers, as he stated – “Financial institutions offering mobile banking are thus obliged to provide secure mechanisms for their customers….. They have a duty to take reasonable measures to ensure that their digital banking systems and technology are secure and are regularly reviewed and updated for this purpose. Banks should know when a suspicious transaction or withdrawal takes place. They should ensure that transactions on their digital banking services can be traced and checked as long as their received by their system”. Thus, financial service providers should have adequate information systems capable of monitoring consumer accounts and potential suspicious patterns or activities.
Having established the duties, it is important that as consumers we understand the obligations that accompany them. Financial service providers should give regular updates to consumers on how to access digital financial services, password selection, the availability of password authentication alternatives, as well as alerting the consumer in the event of an unauthorized transaction, procedures to be taken to report any security threat and special attention should be taken while educating the vulnerable as per Hon Justice Stephen Mubiru. In other words, the moment you open a digital account, on top of ensuring reasonable steps are taken to secure your funds, financial service providers must ensure that consumers are regularly updated, most especially when a security threat has been detected, or any other information that allows us to better secure our digital accounts.
On the other hand, as consumers, we have a responsibility to keep our digital account information private, in the words of Hon Justice Stephen Mubiru “If a customer gives his or her online banking details to anyone, it comes with the risk of losing whatever protection the bank offers against unauthorized transactions. This could result in the customer being responsible for an unauthorized transaction on his or her account, and in such cases the customer will not be refunded for any such lose….”. This goes to say, to avoid unprecedented losses, as consumers we must be keen with whom we share our information including family members. For instance, if you receive a call from a mufere claiming to be a customer care agent requiring your pin to upgrade your Simcard or bank account details, do not entertain them because chances are they using social engineering fraud tactics to manipulate you into volunteering private information. Do not be quick to authorize unknown withdrawal pop-up requests.
As digital financial channels grow and diversify so do the avenues employed by fraudsters. Financial service providers should not behave unreasonably with our digital accounts and expect to avoid accountability, and neither should we.This goes to say, both the financial service providers and us the consumers have a responsibility to protect our funds, and not act recklessly while going about our daily activities.
