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CBN Suggests That Banks Will Pay If Someone Uses Your Phone To Make Transfers Even if It’s Your Fault 

 The Central Bank of Nigeria (CBN), perhaps in response to recent fraudulent activities using mobile USSD banking platforms, has issued a draft policy revising the guidelines for their operation. This applies to commercial banks in the country.

 Here are key points from the draft policy

  1.   Mobile money operators are eligible for short codes upon meeting the requirements by the Nigerian Communications Commission (NCC).

  2. Other interested operators are to apply for a letter of Comfort from the CBN before being issued a short code by the NCC.

  3. Put in place a strong mechanism for authentication. 

  4. Use USSD channels with a secure encryption platform. 

  5. Implement masked pin entry. 

  6. USSD channels shall not be used to relay other electronic banking details of a customer. 

  7. Transmission of messages between the customers phone and base stations should be encrypted.

  8.  Customer complaints are to be resolved within 24 hours. Failure to do this, will lead to a penalty. 

What is USSD

 USSD (Unstructured Supplementary Service Data) is a system where customers carry out banking transactions on their mobile phones using a short code. USSD banking has gained increasing prominence as banks seek to diversify their income, and customers adopt it due to convenience and ease of service

Why the apex bank may have issued the guidelines 

The apex bank, may have decided to revise the guidelines due to their increasing adoption by Nigerians, and the multiplicity of short codes in use. Virtually every commercial bank in the country has their unique USSD code. Bank customers have often complained of the slow response of banks to errors in USSD transactions. The absence of an authentication mechanism means criminal elements who have access to individuals phones, can carry out unauthorised transactions. The banks have often denied any form of liability when this happens.

Implications of the guidelines 

Banks in the country may incur extra costs in order to meet the guidelines set by the CBN. Banks will either pass on these costs to their customers, or absorb them leading to a drop in other income for them.

CBN Suggests Banks Will Pay If Someone Uses Your Phone To Make Transfers Even if It’s Your Fault

In another development, the Central Bank of Nigeria through its Director, Banking and Payments Department, ‘Dipo Fatokun, has earlier this week revealed that commercial banks will bear the cost of “fraud” perpetuated on customers accounts who lose money through the mobile money-driven Unstructured Supplementary Service Data (USSD) .

Most commercial banks enforce customers to use the USSD Banking platform to transfer money to third-party, buy airtime, open accounts, pay bills and book travels, among other services, using their mobile phones. However, customers do not really need to use a PIN to personalise and consummate a transfer. 

CBN Director, Banking and Payments Department, ‘Dipo Fatokun, said
  “We have reviewed the process of USSD and instructed banks that they must use a PIN. It is possible for people to come in contact with your phone, and also come in contact with your ATM card and so, use the last four digit of your card as PIN and that is dangerous. Give a customer a PIN, which is known only to him. One of the banks, I won’t mention names, told us they needed to do system configuration, to ensure that customers can use one time password (OTP) or give the customer password or a token….Meanwhile, until that is done, the banks assured us, in writing, that any customer that suffers losses, they would pay. So, if you have cases of people who have suffered losses on USSD platform and their money has not been refunded, let us have it,”

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