Security & Fraud

In South Africa, Debit Order Fraud Grows

Amid the headlines about cryptocurrency fraud, hacked digital wallets, data breaches and synthetic identities, some methods of making off with ill-gotten gains may fly a bit under the radar — they may even seem quaint.

In South Africa, there’s been a rise in debit order fraud. As noted Tuesday by MyBroadband, there’s a level of ease for consumers to reverse their debit orders. That ease of use means that they are all too often able to dispute the orders and have them reversed.

The rise in disputed orders has been a significant one. Enoch Malisa, chief operating officer for the Payments Association of South Africa (PASA), stated that 90 percent of those disputes are tied to consumers contacting banks and reversing orders that had been previously authorized. In terms of the larger backdrop, the percentage of non-authenticated early debit orders that were disputed in the second quarter of this year stood at 12.7 percent. In terms of sheer numbers, the average monthly volume was 14.7 million, which means that 1.9 million transactions were disputed each month

One correlation, noted PASA, was that when the economy dips, the incidences of those disputes goes up.

PASA is looking to make it harder to dispute and reverse those transactions, with discussions in place with the senior counsel. There are also efforts being made to educate consumers on when it is legitimate (and how) they should dispute debit activity. In the meantime, PASA is gathering evidence to conduct actual prosecution of such fraud, handing cases and prosecution over to the South African Banking Risk Information Centre.

Malisa said that if trends continue, in five years, with the dispute rate touching almost 60 percent, the current system might collapse.

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Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The July 2019 AML/KYC Tracker provides an in-depth examination of current efforts to stop money laundering, fight fraud and improve customer identity authentication in the financial services space.

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