How safe is Nepal's digital banking transactions?

 How safe is Nepal's digital banking transactions?

More than a thousand complaints of digital financing fraud, i.e. fraud through digital payments, are registered in Nepal every year. There has been an increase in frauds saying "We are calling you from the bank". There is also a problem of accessing the customer's account by asking for OTP of mobile banking or digital wallet and withdrawing money.

From time to time, the police and banks and financial institutions are also publishing awareness-raising information to avoid such frauds. To further strengthen the security of digital banking, they are also adopting measures such as Two Factor Authentication (2FA), 3D Secure, secure use of passwords and PINs, Secure Sockets Layer (SSL). However, such incidents have not decreased.

From the ATM cards we use to online banking, opening online accounts, all activities fall under digital banking. Digital banking has made banking facilities faster, safer and more accessible. However, along with the convenience, fraud has also increased. Just as we can do all our financial transactions on our mobile phones without going to the bank, thieves or fraudsters can steal all the money in our accounts online without even reaching the bank. In many cases of digital fraud, the user is at fault. However, cyber security experts say that users, as well as banks and financial institutions, and payment providers, need to strengthen their secure transaction systems.

“Most large-scale frauds are caused by the failure of the relevant institutions to secure their systems rather than by the users,” says cyber security expert Narayan Koirala. “More financial institutions are now seen to be sensitive to cyber security than before. Commercial and development banks in particular are trying to strengthen cyber security.” However, he says that such problems are seen in new institutions that have entered the fintech sector.

Banks and financial institutions are aware of such problems. They are also making customers aware of such problems by repeatedly issuing various notices. However, these incidents occur due to lack of digital literacy and falling into various temptations. Compared to mobile banking, digital wallets have been found to be more prone to such frauds. Again, since bank accounts are linked to the wallet itself, it is easy to withdraw money from the bank account as soon as you have access to the digital wallet, says Hem Kumar Shrestha, head of the IT department at Machhapuchhre Bank.

"If we look at the past, fraudsters could withdraw money from the account even by getting only an OTP. But now, with the implementation of the mobile number verification feature, the thefts through OTP have decreased," he said. "Now, we can see an increase in the number of customers being lured to ask for money by saying that they have won money in the lucky draw or that a parcel has arrived from abroad. Customers themselves need to be aware of this."

He believes that the main reason for this is the digital divide. He said that not all customers are literate in digital technology and fraudsters take advantage of this to commit fraud. Since the methods of fraud are also changing, it cannot be said that AI technology will not be used in the future. He stressed that all stakeholders, including customers, banks, wallets, policymakers, and others, should be aware of the current and future problems and mitigate them.

Payment service provider and operator Nepal Clearing House Limited (NCHL) says that such incidents are less in Nepal compared to other countries. NCHL CEO Nishelman Singh Pradhan emphasizes that the number of digital financing frauds should be reduced and that initiatives should be taken for compensation after the incident.

"Various countries have a practice of arranging insurance for compensation in the field of digital payments using technology. This practice is not in the case of Nepal," he says. "Due to the lack of such a policy, customers, banks, and intermediaries are also facing problems. If insurance can be arranged, there is a possibility that customer confidence in digital payments will increase further."

Some mistake or weakness we make becomes an easy path for fraudsters. As the saying goes, ‘A thief is always one step ahead’, incidents continue to occur even as we become more vigilant and strengthen the system. The police say that all parties concerned should be aware of the new styles of fraudsters.

Recently, fraudsters have been found to be taking personal details by forcing customers to share their screens, says CIB Superintendent of Police Sudhir Raj Shahi. “Incidents of forcing customers to share their screens and obtaining personal details, passwords and accessing customer accounts have also increased,” he says.