ABSTRACT
E-banking offers a number of advantages to financial
institutions, including convenience in terms of time and money. However,
criminal activities in the information age have changed the way banking
operations are performed. This has made e-banking an area of interest. The
growth of cybercrime – particularly hacking, identity theft, phishing, Trojans,
service denial attacks and account takeover– has created several challenges for
financial institutions, especially regarding how they protect their assets and
prevent their customers from becoming victims of cyber fraud. These criminal
activities have remained prevalent due to certain features of cyber, such as
the borderless nature of the internet and the continuous growth of the computer
networks. Following these identified challenges for financial institutions,
this study examines e-banking fraud prevention and detection in the Nigerian
banking sector; particularly the current nature, impacts, contributing factors,
and prevention and detection mechanisms of e-banking fraud in Nigerian banking
institutions.
This study adopts mixed research methods with the aid of
descriptive and inferential analysis, which comprised exploratory factor
analysis (EFA) and confirmatory factor analysis (CFA) for the quantitative data
analysis, whilst thematic analysis was used for the qualitative data analysis.
The theoretical framework was informed by Routine Activity Theory (RAT) and
Fraud Management Lifecycle Theory (FMLT).
The findings show that the factors contributing to the
increase in e-banking fraud in Nigeria include ineffective banking operations,
internal control issues, lack of customer awareness and bank staff training and
education, inadequate infrastructure, presence of sophisticated technological
tools in the hands of fraudsters, negligence of banks’ customers concerning
their e-banking account devices, lack of compliance with the banking rules and
regulations, and ineffective legal procedure and law enforcement. In addition,
the enforcement of rules and regulations in relation to the prosecution of
financial fraudsters has been passive in Nigeria. Moreover, the findings also
show that the activities of each stage of fraud management lifecycle theory are
interdependent and have a collective and considerable influence on combating
e-banking fraud. The results of the findings confirm that routine activity
theory is a real -world theoretical framework while applied to e-banking fraud.
Also, from the analysis of the findings, this research offers a new model for
e-banking fraud prevention and detection within the Nigerian banking sector.
This new model confirms that to have perfect prevention and detection of
e-banking fraud there must be presence of technological mechanisms, fraud
monitoring, effective internal controls, customer complaints, whistle-blowing,
surveillance mechanisms, staff-customer awareness and education, legal and
judicial controls, institutional synergy mechanisms of in the banking systems.
Finally, the findings from the analyses of this study have some significant
implications; not only for academic researchers or scholars and accounting
practitioners, but also for policymakers in the financial institutions and
anti-fraud agencies in both the private and public sectors.
CHAPTER
ONE: INTRODUCTION
1.0
Introduction
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 e-banking, 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.
Thus, the traditional banking
system, which consists of physical branches, is now being threatened by
information and communication technologies characterized by automated systems
of interaction with customers (mobile banking, call centres, automated teller
machines (ATMs), online banking), that include relatively minimal costs and
permit customers to select from the alternative delivery channels (Keivani et
al., 2012). Therefore, electronic banking has become a great business; the
transformation from traditional banking to electronic banking has been a “Leap”
change (Yazdanifard, WanYusoff, Behora, & Abu, 2011; Wang & Huang,
2011).
Globally, the electronic
banking system addresses several emerging trends: it is very convenient and
easy for electronic banking users to manage and access their bank accounts at
any time and from anywhere in the world (Brar, Sharma & Khurmi, 2012). The
banking sector has been strengthened by this development in recent years, since
electronic banking saves vast amounts of resources in areas such as investments
into ATMs, staff training, opening of branches and other operational costs
(Chaturvedi & Meena, 2016). The internet has improved users’ experience of
electronic banking operations dramatically (Abu-Shanab & Matalqa, 2015).
Banking transactions can now be performed any place, anytime in the world
through any bank delivery channel: ATMs, POS, Smart TV, personal computers,
telephones are among the channels a customer might consider (Hoehle,
Scornavacca & Huff, 2012).
E-banking is the significant
application of the internet for banking activities, and bank sectors have
upgraded their business strategies with the assistance of the internet. Banks
have provided their services via the internet and thereby electronic
transactions have increased speed in the banking industry worldwide (Mahdi,
Rezaul & Rahman, 2010). The advancement of electronic transactions gives a
tremendous prospect for benefits to consumers and financial institutions (Singh
& Singh, 2015).
Corroborating this, the
emergent modern technologies have resulted to significant transformation of
banking approaches and techniques. Bank branches have started to lose ground to
computer-generated banking as the use of distant banking services has been
augmented (Hoehle, Scornavacca & Huff, 2012). Globalization, transforming
social trends, competition and particularly information and communication
technology advancements have brought intense reform of the banking system
(Loonam & O’Loughlin, 2008). Generally, information infrastructure is
considered worldwide as an opportunity for introducing innovative electronic
distribution channels for bank products and services.
In contrast, fraudulent
electronic activities are increasing and becoming sophisticated, severely
threatening and menacing the trust and security of electronic banking services
(Mahdi, Rezaul & Rahman, 2010). E-banking fraud has turned into a
thoughtful and serious phenomenon to the financial fraud and crime management
in the banking industry across the entire globe (Rajdeepa & Nandhitha,
2015). These current electronic fraud opportunities are often tremendously
difficult to mitigate due to their technological complexity; hence, banks may
devote substantial resources endeavouring to prevent and detect them
(Kranacher, Riley & Wells, 2011). Banks encounter challenges in preventing
and detecting fraud, and these challenges can often be aggravated by the
organizational frameworks, political frameworks, regulatory frameworks and
newly invented technology approaches that are in place. Nevertheless, even the
issuing of momentous regulatory frameworks and the regulatory supports of a
given economy or nation cannot be predicted to eliminate or minimize the
occurrence of fraud in the banking sector (Hoffman, 2002). However, in the very
beginning of electronic banking systems, the scale of fraud was very
insignificant because the banking industry was one of the most strictly
regulated sectors, which treats prevention of fraud as a duty (Mahdi, Rezaul
& Rahman, 2010; Shannak, 2013).
On the contrary, banking represents the mediator of
the economy; fraudulent acts have brought enormous losses that are affecting
all the performing activities (Sahin &Duman, 2010). Equally, banking
development, from traditional banking to electronic banking, is.....
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