Governments across the continent must work to ensure that the Pan-African Payment and Settlements Systems (PAPSS) for continental trade is able to fight and address fraud-related issues in order to promote trust between buyers and suppliers, an international electronic fraud expert, Emmanuel Obinne, has advised.
The African Continental Free Trade Area (AfCFTA) secretariat recently announced that the PAPSS platform is being developed in collaboration with the African Export-Import Bank (Afreximbank). This will facilitate payments as well as formalise some of the unrecorded trade due to prevalence of informal cross-border trade in Africa.
However, with the rising cases of cyber fraud ever since the world was hit with the global pandemic – which essentially increased online transactions, particularly those that relate to payment systems, Head of Growth and Partnerships, Banking Payment Context (BPC), West Africa, Emmanuel Obinne, says it is crucial that governments work to ensure the payment system developed for continental trade is safe and secure so as to ensure trust among buyers and suppliers.
“The largest impact that fraud can have on achievements of the AfCFTA is erosion of trust. In business, there must be trust between suppliers and buyers. As a buyer, how am I convinced in knowing that I am buying from the right vendor; and that vendor is going to fulfil the product or service the way is expected to be delivered? So if we have incidence of fraud, I will be afraid to continue transacting; so a lot has to be done in protecting and securing trade across the continent.
“If you look at the Alibaba concept, through a routine system and due diligence check that they carry out, some suppliers become verified on the platform. So, when you go to Alibaba you are much more inclined to purchase from that verified vendor.
“So for the AfCFTA to succeed, I think governments should actually set up market places. A market place is basically about bringing these buyers and suppliers into a digital place where they have an online store, and each government takes the responsibility of verifying their suppliers so that each of these market places can be connected across the continent.
“Backing that up with due diligence or ‘know your customer’, governments will be able to ensure that only those who are verified to supply can do so on the platform. In such cases, it will be easier to identify the source of fraud and who to go after,” he said in an interview with the B&FT.
According to Juniper Research, retailers will lose an estimated US$130billion in cumulative revenue due to Card-Not-Present (where buyer and seller do not meet in person) fraud between now and 2023; and the payment industry will be spending around US$10billion yearly on fraud detection and prevention capabilities.
This type of fraud involves the unauthorised use of specific credit or debit card numbers, security codes, expiry dates and billing addresses to purchase products and services via e-commerce websites or over the phone. Fraud experts say that Card-Not-Present fraud has increased by 70 percent since start of the pandemic.
For Mr. Obinne, such statistics only point to the fact that whichever payment system method the AfCFTA secretariat will choose to facilitate trade should be robust enough and have systems in place to redress any challenges that may come with it.
“In the market place there is a payment system which, in the case of the AfCFTA, we can look at as an e-commerce payment gateway where you can use your cards such as Visa, Mastercard etc. There could also be use of swift payment systems. So, essentially, those payment gateways which have passed regulatory requirements, security requirements by payment industry professionals would be eligible to be on those platforms.
“And settlement and dispute management processes will also have to be executed. So, in a nutshell, it is really about governments taking charge and ensuring that their platform is available to vendors and is secure.
“Then there is also the fraud management component to manage fraud on that platform. So, we need a system that will help identify fraud patterns, how people buy, how sellers sell; and detect when transactions are out of the ordinary. There has to be strong customer authentication, which is to ensure that only the customer is the one carrying out a transaction,” he said.