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AN ASSESSMENT ON THE ACTIVITIES OF FRAUDSTERS USING ATM PIN

ABSTRACT

The use of ATM has grown rapidly in popularity because of its low banks transaction  costs and customers convenience which has made it a basic element of today’s financial service delivery. However, the ATM which is meant to be serving the customers better is now becoming a nightmare for some customers because of fraud perpetuated in their accounts through ATM withdrawals. The main purpose of this work is to examine the activities of fraudsters through ATM pin and how these frauds have affected financial institution growth and customers patronage of banks. This researcher made use of four banks as a case study for this research work. Data was collected from questionnaires, interviews and observation from the four banks under study. Three hypotheses was tested using the chi- square statistical tool and it was observed that there is a significant relationship between ATM fraud and fraud in Nigeria, it was also observed that ATM fraud affects customers patronage and financial institution growth. In conclusion, the activities of fraudsters needs to be monitored and measures should be put in place to mitigate these frauds. To solve this, additional security layer on the ATM is recommended and proper monitoring of the ATM machine by the banks. We believe that if banks and service providers heed to some of these suggestions in this work, we will have a safer, hassle- free and worth while banking experience in this country.

CHAPTER ONE

INTRODUCTION

1.1 Background to the study

With the global use of progressively more sophisticated internet and information technology (Papazoglou, 2003), electronic banking is developing as a key channel for banking businesses (Wei et al., 2012). Globally, remote banking is regarded as a characteristic of the new economy, which involves electronic transactions between banks and their customers (Banstola, 2007). Electronic banking, generally referred to as ebanking, is the latest delivery channel for the banking system (Keivani et al., 2012). The term “e-banking” has been discussed in several ways by many researchers from diverse backgrounds, mostly because electronic banking involves quite a lot of banking activities through which customers can inquire for financial information and implement transactions by means of a digital television, telephone, mobile phone or computer (Hoehle, Scornavacca & Huff, 2012). Perkins and Annan (2013) describe electronic banking as the rendering of services and dissemination of information by banks to customers through various delivery channels that can be accessed with a personal computer or other electronic devices.

However, the banking sector is being reformed by globalization, innovation, customer needs and competition. Due to the development of a knowledge-built economy and the emergence of the latest information and communication technology, financial institutions particularly the banking industries have experienced thought-provoking changes during the last decade. According to the Wisdom (2012), Information and Communication Technology, the most significant factor in the forthcoming development of the banking industry, enhances banks’ ability to produce sophisticated products, to have superior market structures, to diversify their markets and to expand globally. Furthermore, Darlington (1999) states that over the past three decades, customers’ needs have changed significantly: customers are demanding simplicity in their daily banking services together with maximum security and safety.

The traditional and ancient society was devoid of any monetary instruments and the entire exchange of goods and merchandise was managed by the “barter system”. The use of monetary instruments as a unit of exchange replaced the barter system and money in various denominations was used as the sole purchasing power. The modern contemporary era has replaced these traditional monetary instruments from a paper and metal based currency to “plastic money” in the form of credit cards, debit cards, etc. This has resulted in the increasing use of Automated Teller Machine (ATM) all over the world.

The use of ATM is not only safe but is also convenient. This safety and convenience, unfortunately, has an evil side as well that do not originate from the use of plastic money but rather by the misuse of the same. 

This evil side is reflected in the form of “ATM frauds” that is a global problem. The use of plastic money is increasing day by day for payment of shopping bills, electricity bills, school fees, phone bills, insurance premium, traveling bills and even petrol bills. The convenience and safety that credit cards carry with its use has been instrumental in increasing both credit card volumes and usage.

The world at large is struggling to increase the convenience and safety on the one hand and to reduce its misuse on the other. An effective remedy for prevention of ATM frauds, however, cannot be provided unless we understand the true nature of the problem.

Brunner et al (2004) states that the ATM fraud is not the sole problem of banks alone. It is a big threat and it requires a coordinated and cooperative action on the part of the bank, customers and the law enforcement machinery. The ATM frauds not only cause financial loss to banks but they also undermine customers' confidence in the use of ATMs. This would deter a greater use of ATM for monetary transactions.

The Computer Crime Research Centre (2009) opined that the traditional and ancient society was devoid of any monetary instruments and that the entire exchange of goods and merchandise was managed by the ‘barter system’. The use of monetary instruments as a unit of exchange replaced the barter system and money as the sole purchasing power. The modern contemporary era has replaced these traditional monetary instruments from a paper and metal based currency to ‘plastic money’ in the form of credit cards, debit cards etc.

The evolution of these various ‘plastic money’ has resulted in the increasing use of ATM all over the world. The use of ATM is not only safe but is also convenient. This advantage of safety and convenience has unfortunately been lessened by the frauds that are perpetrated by ‘plastic money’.

The ease of settlement of bills such as electricity, school fees, phone bills, insurance premium, traveling bills and even petrol bills has made the use of plastic money more important in the Nigerian Banking system. The convenience and safety that credit cards carry with their use has been instrumental in increasing both credit card volumes and usage in Nigeria.

The growth of ATMs in Nigerian banks rose from 83% in 2006 to 289% in 2007. Almost all banks introduced the ATM in their bank premises in 2007. The increase in number of customers using

It is therefore in the interest of banks to prevent ATM frauds. There is thus a need to take precautionary and insurance measures that give greater "protection" to the ATMs, particularly those located in less secure areas.

1.2 Statement Of The Problem

It will be pertinent to highlight the needs for embarking on a study of this nature which will examine the activities of fraudsters through ATM. Within the last two decades, electronic payment has gained popularity in the banking sector especially making use of online networking. Reasons for this are not far-fetched, Millions of naira have gone to the fraudsters’ account through the bank-fraud. Many innocent bank-customers have been dispossessed of their hard currencies through the various bank crimes. The importance of electronic banking cannot be over-emphasized such as bringing efficiency and absolute control in the banking service by offering prompt payment. Other problem associated with the former system like being cash-crunched especially during the weekend or while embarking on international travelling transaction have been eradicated. In spite of multifarious advantages of e-banking many customers still do not patronize the use of ATM.

This study will attempt to seek answers to the following problems.

Can ATM cause fraud in the banking industry in Nigeria?

Is there any relationship between ATM and fraud in Nigeria?

Is there any need for ATM since the rate of fraud is alarming?

How do these fraudsters commit these frauds?

Does ATM fraud affect financial institution growth?

What are the reactions of the banks when these frauds are committed?

What are the reactions of the customers that are affected by the fraud?

What are the reactions of the central bank of Nigeria in regulating this fraud?

1.3 Objectives Of The Study

The purpose of this study is to;

To know the relationship between ATM fraud and fraud

To examine the ways by which these frauds are committed.

To know the measures that central bank of Nigeria has taken to mitigate this fraud.

To know the reactions of the customers affected by these fraud.

To know the reactions of banks when these frauds are committed.

To know whether fraud affects financial institution growth

To find out the ways that we can avoid this risk.

To proffer solution to fraud in Nigeria.

1.4 Significance of the study

The outcome of this study will have tremendous effects on many stakeholders.

•       United Bank for Africa UBA will benefit immensely from the outcome of this study by improving the efficiency of the service to the customer especially through e-banking.

•       UBA customers and other banks customers will gain monumentally by increasing their awareness on the importance of using ATM and thus be encouraged to patronize it.

•       Financial institution especially Central Bank of Nigeria will increase the institution’s income in relation to the number of the tellers employed. This is because fewer staff would be required to carry out customer transaction such as cash withdrawal, printing of bank statements and requesting for cheque book.

1.4 Research Questions

What is the relationship between ATM fraud and fraud?

What are the ways by which these frauds are committed?

How will the central bank of Nigeria stop this crime.

How can the customers and users of ATM avoid the risk of being defrauded?

What are the solutions to fraud in Nigeria.

How does fraud affect financial institution growth.

1.5  Scope/limitation of the study

This study on an assessment of the activities of fruadsters using ATM service at United Bank for Africa Osogbo branch.