How former OKash CEO wants to fight fraudsters and chronic debtors in Nigeria • Techpoint Africa
The lack of a central database to identify repeat offenders is probably a bigger problem than the threat of financial fraud in Nigeria.
Companies rarely publish fraud and cyber attack cases, and the figures in independent reports are sometimes different.
In 2018, the Nigerian Deposit Insurance Commission (NDIC) reported that Nigerian banks had lost more than 15.5 billion yen ($ 41.6 million) * due to the fraud. This number was staggering, considering that commercial banks lost only 2.3 billion yen ($ 6.3 million) * and 2.4 billion yen ($ 8 million) * in 2017 and 2016, respectively.
The Nigeria Inter-Bank Settlement System (NIBSS) also reported that the banking sector lost 2 billion yen ($ 5.5 million) to wire fraud in 2018.
In addition to fraud, non-performing loans have plagued the financial sector.
In 2018, the NDIC reported that commercial banks had provided 15-29 trillion yen ($ 44.16 billion) * in loans to the national economy and that at the end of the year, non-performing loans amounted to 1.79 trillion yen ($ 4.9 billion) *.
With banks being reluctant to lend, many fintech platforms have sprung up to try to solve the problem of lending to the real economy.
Platforms like Carbon, Branch, FairMoney, Page Financials, and Renmoney all offer easy-to-obtain unsecured loans, albeit at relatively high interest rates. ,
However, these platforms also have to deal with non-performing loans, and without easy access to data, chronic debtors have emerged.
With his startup Cadnetworks, Darlington Onyeagoro, former Head of Strategy and Business Development at Guaranty Trust Bank Plc, Diamond Bank and CEO of Opera OKash, is working on an ambitious and expansive solution to tackle fraud inside and out. outside the Nigerian financial sector.
Interestingly, startups like Clairvoyance have launched Sigma, a database of scammers, to solve this problem. Karma.ng also helps these fintech platforms to report IP addresses used for fraud.
However, Onyeagoro believes it can be tackled on a much larger scale.
Comes the blacklist
Having worked in commercial banks and a financial technology firm, Onyeagoro has firsthand knowledge of the massive rate of defaults, which he says is a huge pain for most startups in the industry. Its solution to this problem is the blacklist.
“The Blacklist is a database for chronic debtors and fraudsters reported by Nigerian registered and verified businesses (financial and non-financial) and individuals. Any natural person or company registered in Nigeria is free to download a list of their debtors or associates, employees or clients who have defrauded them, ”he explains.
Onyeagoro believes that since the blacklist will contain information about people who have defrauded companies outside the financial sector, microcredit platforms can use it to verify the character of people with little or no credit history.
“A lot of fintech companies, especially smaller ones, don’t go to credit bureaus because of the high cost of accessing their well-established database,” he says.
In 2008, three major credit bureaus – CRC Credit Bureau Limited, CR Services (Credit Bureau) Plc. and FirstCentral Credit Bureau Limited – have been licensed by the Central Bank of Nigeria (CBN) to maintain a database of lending activities of all major banks. .
Some non-commercial banks may perform checks with only one credit bureau, but financial institutions should check with at least two of the three credit bureaus when checking a credit score.
The CRC Credit Bureau in Nigeria charges 2,990 ($ 7.75) for individual credit reports. Although pricing information for companies is not readily available on their respective websites, sources reveal that API calls to the database of credit bureaus are typically between 250 (microfinance banks) and 4,000. (commercial banks).
“Businesses normally negotiate the price by number, and it can go down to 10 yen if calls exceed 1 million in volume,” our source explains.
Onyeagoro intends to charge between $ 30- $ 50 per API call for fintech platforms using the blacklist. However, this price is negotiable.
“I want to be flexible with the prices because you can’t control how many API calls you have to make per day. 10,000 people could download the app, and you would need to make 10,000 API calls for each one, ”he says.
Note that banks and other financial institutions submit data to credit bureaus for free.
However, in addition to making it free, Onyeagoro wants companies to get paid for submitting defaults data.
Since other companies pay for each API call or manual search on an individual, he intends to share the product with the fintech company that provided the data.
Interestingly, if more than one company provides data on an individual, only the first company will reap the rewards.
“If Carbon reports M. A for a 50k fault, and OKash reports for a 30k fault. When Fairmoney makes the API call for MR A, Carbon gets the payout ”,
In addition, the presence of several digital lending platforms with emerging predatory practices gives rise to a pause. Interest rates are generally high, and the harsh economic realities of COVID-19 suggest some people may not be able to repay.
Onyeagoro believes that the blacklist can be a repository for these lenders, so that users are not reported to a traditional credit bureau. The target will be for micro-loans of less than 100,000 ($ 260).
If this is done, they may still be able to get loans from the banks that frequent the credit bureaus, but they will be denied credit from other microcredit platforms that subscribe to the blacklist.
It should be noted that the CBN has already given the green light to banks to automatically debit BV-related accounts from defaulting debtors. This then means that efforts are coming from various corners to stem the tide of non-performing loans.
Beyond financial institutions
Rather than doing it strictly for fintech companies, Onyeagoro says the Blacklist platform will be open to all individuals and businesses. However, proper verification is required in the form of a valid ID or company registration document.
With this in place, potential owners, employers, and business partners can search for blacklisted individuals and verify that they have not engaged in fraudulent activity.
Onyeagoro explains this use case with the typical example of a fraudster posing as an employee of a reputable company.
“GT Bank, for example, normally posts a list of authorized signatories to an account. Now we are expanding it so that every company can publish the names and signatures of former staff who can no longer approve transactions on their behalf. “
He also explains that the blacklist can be used by companies to report employees who have left their organization voluntarily or due to fraudulent activity. In addition, recruitment agencies can also reference the blacklist as part of their recruitment process.
However, as this platform is open to everyone, there is a risk that it may be used for malicious purposes; individuals could be blacklisted by anyone they have offended.
When asked about this issue, Onyeagoro admitted it was a possibility. Nonetheless, individuals or businesses will be required to provide evidence in the form of non-disclosure agreements, memoranda of understanding, agreements, receipts, invoices, bank statements, etc.
It would cost 1,000 to submit, and individuals will be allowed to challenge the report if they deem it to be false.
While these provisions are unlikely to limit malicious activity by specific individuals, they could limit it.
Platforms like the Blacklist may not need regulatory approval right now, but that could change at any time.
Onyeagoro says he is currently seeking approval from CBN and NDIC. To access the blacklist, please visit Blacklistng.com
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