Combatting Fraud in Nigerian Banks and Fintech with Flit’s Transaction Monitoring API

Fraud remains a critical threat to Nigeria’s financial sector, with banks and fintechs projected to lose billions of naira annually if left unchecked. According to a Techpoint Africa report, 72% of Nigerian fintechs identify fraud as their top operational challenge, primarily targeting digital wallets and bank transfers through tactics like phishing, account takeovers, and synthetic identity fraud. The report highlights that 43% of fraud cases involve unauthorized transfers from compromised accounts, while 29% originate from fake digital wallet registrations. To address these vulnerabilities, Flit, an upcoming fraud transaction monitoring API, is being developed to detect and prevent suspicious activities in real-time, offering tailored solutions for Nigeria’s digital financial ecosystem.

Here’s how Flit’s tools will tackle these challenges:

1. Real-Time Transaction Risk Scoring

The problem: Instant payment systems like Nigeria’s NIP (NIBSS Instant Payments) are prime targets due to their irreversible nature. Techpoint Africa notes that a single compromised account could funnel millions of naira to fraudulent beneficiaries within minutes.

Flit’s solution:

• Dynamic risk scoring will analyze transaction parameters such as:
• Outcome: High-risk transactions, such as a digital wallet attempting to transfer ?2 million to a new beneficiary, will be automatically flagged or blocked.

2. User Identity Verification

The problem: Synthetic identities—fake profiles built with stolen or fabricated data—account for 34% of digital wallet fraud in Nigeria. Fraudsters often exploit burner phones and disposable emails to create accounts for money laundering.

Flit’s solution:

• Cross-referencing data with national databases (e.g., BVN, NIN) will help flag mismatches during onboarding.
• Detection algorithms will identify burner phone numbers (e.g., numbers registered 24 hours before wallet creation) and disposable email addresses.
• Use case: Flit’s tools could help fintechs block thousands of synthetic accounts, mirroring the success of similar systems cited in Techpoint’s report.

3. Device and Behavioral Biometrics

The problem: Account takeovers (ATOs) surged by 67% in 2023, with phishing kits enabling fraudsters to steal credentials for digital wallets.

Flit’s solution:

• Device fingerprinting will detect spoofed devices or emulators (e.g., software mimicking high-end smartphones).
• Behavioral biometrics will monitor anomalies like atypical typing speeds or navigation patterns, signaling potential bot-driven activity.
• Impact: Early trials suggest such features could reduce ATOs by over 50% in Nigerian financial institutions.

4. IP/Geo-Location Analysis

The problem: Cross-border fraud rings increasingly target Nigerian digital wallets, using VPNs to mask IP addresses. Unauthorized transfers might route through servers in Cameroon or Eastern Europe.

Flit’s solution:

• Geo-location tools will flag IP addresses linked to VPNs, Tor nodes, or high-risk regions.
• Mismatch detection will identify discrepancies, such as a transfer initiated from a Ghanaian IP address for a user with an Abuja-registered SIM card.

5. Custom Rules Engine

The problem: Fraudsters constantly evolve tactics, such as “transaction splitting” to bypass limits (e.g., sending ?500,000 via five smaller transfers).

Flit’s solution:

• Financial institutions will be able to set rules like:
• Adaptability: Rules will adjust to emerging threats, such as blacklisting IPs linked to new fraud hotspots.

Alignment with Nigeria’s Regulatory Priorities

As emphasized by Techpoint Africa, collaboration and compliance are critical to curbing fraud. Flit will align with these goals by:

• Complying with CBN guidelines, including risk-based authentication and mandatory KYC checks for digital wallets.
• Facilitating data sharing between institutions to identify cross-platform fraud patterns.
• Aiming to reduce false positives by 30% compared to legacy systems, ensuring minimal disruption to legitimate transactions.

Conclusion

With Nigeria’s digital payment volume reaching ?611 trillion in 2023 (per NIBSS), the threat of fraud will only escalate. Flit’s? API will provide a proactive defense, combining real-time analytics, biometrics, and geo-location tracking to address vulnerabilities underscored by Techpoint Africa. While still in development, Flit represents a strategic opportunity for Nigerian fintechs and banks to safeguard customer trust and advance financial inclusion.

Note: Flit is currently a prototype that is under development. Its features and impact projections are based on proposed capabilities and industry benchmarks from sources like Techpoint Africa and NIBSS.

Collaborators: This project is being developed alongside FATAI AKA , with potential considerations for open-source contributions in the future.

Next Steps:

1. Explore the Flit API documentation.
2. Test integration using Postman.
3. Combine Flit with internal rules for a robust anti-fraud strategy.

The fight against fraud requires collaboration between regulators, fintechs, and tools like Flit. With the right tech stack, Nigeria’s digital economy can thrive securely.

Let’s build a safer financial future—one API call at a time. ??