Kenyan tech innovators seek to stem rising ATM fraud

Rising unemployment due to high population growth and sluggish economic recovery in Kenya has led to increased cases of bank-related crimes.

PricewaterCoopers (PwC) Global Economic crime survey reported some regions including Kenya, South Africa and UK reported an increase of 40 per cent in fraud cases in 2011.

According to a report released by Deloitte Kenya last year, commercial banks in Kenya are losing more than Sh3 billion a year, with Automated Teller Machine (ATM) withdrawals contributing a large percentage of the total incidents.

Young people are, for instance, turning to the salaried middle class by forcing them to part with money by holding them hostage and taking their debit or credit cards to the ATM to withdraw money. Victims who happen to be account holders are normally held hostage and forced to reveal their Personal Identification Numbers (PIN) to fraudsters who use their ATM cards to withdraw money.

Against this background, information technology innovators at Usalama Innovative Systems Ltd are seeking to stem the rising tide of related fraud with a new software that works together with the core banking software.

The company’s co-owners Dennis Karema and Tolbert, an IT professional and a banker respectively, decided to design software that reduces the exposure of ATM users by limiting the proportion of funds that fraudsters can access.

The software provides the user with a second PIN number apart from the original PIN which he reveals to fraudsters when requested. The second PIN only allows them to withdraw a certain percentage of the total amount in the account.

“The second PIN number is what the account holder reveals to ATM fraudsters and therefore limits what can be withdrawn and in the process saving his money and his life,” says Karema.

When the PIN number is fed into the system it shows the available balance as a proportion of the total balance.

This ensures that the account holder incurs minimal losses since the criminals can only access a portion of the money, for instance, 10 per cent of the total value held in the account.

Under normal circumstances, the thieves would withdraw everything in turn until the funds are exhausted from the account.

Statistics show that Kenyans are increasingly opting to use debit and credit cards as a preferred means of settling payments, with over 4.5 million debit cards currently issued in Kenya.

The software also generates reports showing where and when the funds were withdrawn, helping the bank to detect the fraud real-time. The software easily integrates into the core banking software without affecting the normal running of other applications.

A bank can subscribe to the software and have its clients pay a minimal fee for a year to guard against cases of fraud thereby increasing client security. Currently, commercial banks don’t compensate their customers for funds lost this way.

Usalama Innovative Systems was last year ranked fifth by business technology magazine CIO East Africa among a team of other information technology companies for excellence in innovation.