The era of cash-based transactions in Nigeria is gradually becoming a thing of the past, with more cashless forms of transactions being developed and adopted in the Nigerian financial industry.

The use of various cashless forms of payment, such as Point-of-Sale (POS) terminals, instant bank transfers and mobile transfer, amongst others, have gained significant growth in the country, while innovations around more automatic payments forms are being introduced.

However, the issue of cyber threats and attacks has been one of the major problems militating against the growth of digital banking, prompting the need to continually scale up innovations in this area.

Recently, Interswitch, Providus Bank, Mastercard and Thales launched a contactless Tap-to-Pay transaction via smart devices. The service allows for cardholders to make fast, secure, and convenient in-store payments by tapping their NFC-enabled smart device at any contactless-enabled payment terminal.

At a panel session on the importance of tokenization in the Nigerian financial industry, Providus Bank and the other partners, Jonah Adams, the MD, Digital Infrastructure and Managed Services (Systegra). highlighted the strategic importance of such partnership in building the Nigerian FinTech industry.

“Twenty years ago, Fintech 1.0 started, which was built on the back of Interswitch building a real-time online payment infrastructure, that the industry has leveraged. Although Providus Bank had not been birthed at the start of Fintech 1.0, it came on the scene towards the end of Fintech 2.0, which is where mobile transactions came on board and became the new way to do transactions.”

“Collaborations such as this one with Providus Bank, Mastercard and Thales have continued to spurr growth in the industry, with key players like ourselves at heart of innovation.”

“Based on the capability of tokenization, customers can achieve a level of core protection that is not available anywhere in our industry. This is the first in West Africa and the first in Sub-Saharan Africa, which is a major feat that have been achieved with this partnership,” he added.

What the experts are saying

The discussion, which was centred around cyber security in the Nigerian financial industry, featured Babatunde Okufi, Group Head, Business Development, Frank Atat, Divisional Head, E-business at Providus Bank and Peter Ehizogie, Cyber and Intelligence Solutions experts with Mastercard.

Okufi added that as transaction volumes continue to grow, fraudsters also innovate, hence players in the industry need to innovate as well, which begs the need for such tailored innovations as tokenization.

The industry has been able to mitigate the issue of fraud by putting rules in place, such as velocity limits and authentication parameters. Other levels of security include using platforms to track the rules in a dynamic manner, many of which now leverage on neural networks or artificial intelligence (machine learning) to track trends. Despite this level of security being effective, there are still loopholes, as these deal with the transactions in-flight.

However, the value which tokenization brings is that it deals with fraud on card transactions at a more fundamental level, even before the transaction is in flight. According to Okufi, “I like to describe tokenization as a tool that helps us future-proof card payments with a lot of convenience to customers.”

Frank Atat noted that the need to introduce tokenization was in a bid to further strengthen the comfort that comes with the use of card transactions, with growing concerns around cyber threats in the country.

“Due to the ongoing threats, industry players have also keyed into the various cyber tools available, and tokenization will play a significant role with the additional confidence it gives customers in their use of card transactions,” Frank said.

Speaking on the threats, Frank also alluded that the need to aggressively grow the Nigerian financial ecosystem has posed a downside risk to the system. However, industry players have been at the forefront of ensuring that the security of transactions is maintained at every point in time.

While speaking on how Mastercard has been able to ensure transaction safety for its customers, Peter Ehizogie noted that the company approaches the issue of security as a positive risk, that is, removing the frictions from transactions.

He highlighted that the company’s wealth of technologies has also helped in proactively predicting and in most cases, preventing the threat actors from coming up. “The process starts from identification of patterns in the login before the transaction, through to the transaction itself with respect to volume and value, using artificial intelligence, and then reducing the amount of friction that comes into those transaction via various digital security tools”.

He also stressed the need for industry collaboration in the detection of fraud, beyond using AI for prevention, but extending to tracing these transactions and reducing the recovery time.