Ensuring cybersecurity

DIGITAL FRAUD

Pakistan’s rapid shift towards digital payments has transformed how millions of people send, receive and manage money through their smartphones.

Digital/branchless banking has played a major role in this transformation, extending financial services to people who previously had limited access to conventional banking. From paying utility bills and receiving salaries to transferring money and shopping online, digital payments are becoming part of everyday economic life.

This expansion is an important achievement for financial inclusion, but it has also created opportunities for financial fraud. Victims of online shopping scams, impersonation, fake investment schemes, fraudulent job offers and social media fraud are frequently asked to transfer money through mobile wallets. Some major digital/branchless banking service providers often appear in such cases because of their enormous reach and the speed with which money can be transferred.

It is important to distinguish between misuse of a payment platform and wrongdoing by the service provider. No doubt these digital banks provide legitimate financial services to millions of Pakistanis. The concern is how criminals exploit mobile accounts, SIM cards, stolen identities and weaknesses in customer awareness to receive and rapidly move fraudulently obtained funds.

The scale of Pakistan’s digital financial ecosystem makes the issue increasingly important. State Bank of Pakistan data show that branchless banking and digital payments have expanded dramatically. These mobile wallets have customer bases running into tens of millions, while Pakistan’s branchless banking system processes billions of transactions worth trillions of rupees. This represents significant progress towards financial inclusion, but even a small percentage of fraudulent transactions can affect thousands of households.

Pakistan’s two largest mobile financial platforms are reported to have a combined registered account base of more than 100 million, although this does not represent 100 million unique or active users. With such a vast network, a key concern is the misuse of accounts to receive and quickly move fraudulent payments. In some cases, suspected fraud accounts may be operated through misused identity credentials, SIMs registered to other individuals, or third-party ‘mule accounts’, making it difficult to identify the actual person controlling or benefiting from the transaction. Even when the registered account holder is traced, that person may not necessarily be the fraudster. This gap calls for stronger biometric and identity verification, periodic re-verification of high-risk accounts, real-time monitoring of suspicious transaction patterns, rapid restriction of repeatedly reported accounts, and closer coordination among mobile wallet operators, SBP, PTA, NADRA and cybercrime…