As telecom operators in Africa increasingly invest in the mobile money sector, they confront a major fraud crisis, prompting calls for improved security measures.
According to the Global System for Mobile Communications Association’s “State of the Industry Report on Mobile Money 2023”, mobile money fraud in Africa exceeded $1bn, raising concerns that security issues could impede the adoption of mobile money services.
The Chief Executive Officer of Itemate Solutions, Robert Breukelen said in a note to The PUNCH, “While larger, more established telcos already have a track record in combating security concerns, emerging telcos will need to take extra care to ensure their financial services are secure and don’t put their swelling numbers of subscribers at risk, especially as fraudsters continue to adapt their strategies.”
Telcos have admitted to struggling to grow their core business due to the high costs associated with deploying network technologies and slow growth in average revenue per consumer. As a result, operators in recent years are shifting focus to mobile financial services as the next phase of their growth.
Kenya’s Safaricom, which launched M-Pesa in 2007, announced in its financial year 2023 that its mobile money unit revenue grew by 8.8 per cent year-on-year to KSh 117.19bn.
MTN’s MoMo, which launched in 2012, secured a $200m investment from Mastercard earlier this year, boosting its valuation to $5.2bn. Similarly, Airtel is considering a public listing for its mobile money business, SmartCash.
According to GSMA, there were over 1.6 billion registered mobile money accounts, with 400 million created during the COVID-19 pandemic.
By the end of 2022, daily global transaction values exceeded $3.45 billion, surpassing previous forecasts.
The Itemate Solutions CEO said as mobile money subscribers across Africa are set to surpass 800 million by 2025, telcos are under pressure to ensure their financial services are secure.
He warned that as fraudsters are adapting, new entrants to the mobile financial services space must be especially vigilant.
Banks and large insurance companies have extensive systems, processes and policies in place to protect their customers against fraud and other financial crimes, Breukelen stated.
“As a growing number of telcos wish to tap into the lucrative mobile financial services sector, they must make the protection of customers a top priority.”
The CEO revealed that governments across Africa are also introducing stricter regulations aimed at curbing fraud and boosting tax collection, adding further complexity to the regulatory landscape for telecom operators.
“Telcos need to navigate these regulations while ensuring customer protection and maintaining profitability,” he said.
To tackle those challenges, he highlighted Itemate’s technology solution, which offered telcos a way to comply with local regulations while safeguarding customer data.
According to Breukelen, the platform integrates AI-driven customer validation and provides full audit trails to ensure compliance with government systems.
“Our solution helps telcos meet regulatory requirements without compromising security or user experience,” he explained.
As African telcos continued to expand into mobile financial services, the ability to protect subscribers from fraud while adhering to new regulations would be critical to their long-term success, Breukelen concluded.