PREVENTION OF THE USE OF FAKE OR STOLEN ATM CARDS BY INTRODUCING THE ATM LOCK CARDS FEATURE ON MOBILE BANKING APPLICATION

1.1 Introduction

Automated Teller Machine frauds are illegalities connected to the businesses and operations on ATMs. This includes acts such as identity theft, pin misplacement, card theft, password hacking and electronic fund transfer etc. Due to the enormous increase in ATM daily operations and the related increase in robbery and fraud operations. Fraud is a major economic crime which has become one of the most intractable problems of modern day banking. Card skimming is the most common known ATM fraud incident and still overtakes all other ATM committed fraud techniques. It happened when thieves steal users’ card electronic data enabling them to counterfeit the card and use it as the legitimate user where they can withdraw cash or do an online purchasing using their credits (Cluckey, 2015).

As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, Research hypothesis and questions, Limitations of the Study and Definition of technical terms.

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1.2 Background of Study

Recent years have seen many breakthroughs and security incidents relating to ATM security. Those incidents led to significant losses for users, card issuers, and financial institutions. Card trapping which happens when the fraudster traps victim’s ATM card in the machine using any device injected in the ATM to steal the victims’ physical card. Around 18% of ATM frauds had been stated in 2015. Cash Trapping in which fraudulent use a device to trap physically the cash that had been dispensed and hence the customer expects that there is a problem in the ATM and that the transaction is not completed while the fraudulent come back to collect the money once the client left the location. This type of attack is very low comparing to skimming attacks; it was about 15% of ATM committed frauds, a hardware sensor is used to get robust information about the device state (Priesterjahn et al., 2015).

According to Heli (2006), banks and financial institutions all over the world were easily adopters of information and technology. Its use for providing services for customers stretches back to the early 80s when magnetic stripe cards where used to provide account services. This was followed in the 90s by the use of dial up access to customers account using software provided by banks in the last few years, and in particular with the wide spread adoption of internet by customers as well as business.

According to Olugbemi (2007) Nigerian banks have started to offer wide range of its products to their customers making use of sophisticated technology. Financial institutions heavily utilize telecommunication as a tool in the efficient management of customers account, data base and transactions. The introduction of electronic banking introduced new legal element into the customer/banker relationship, issues of data securities, privacy, cyber-crimes, e- payment solutions, electronic records, digital/ electronic evidence etc.

According to Luderman (2009), technology has transformed many sectors, the use of technology in banking has brought banking transactions close to their customers. Before the advent of banking reforms in Nigeria, it was frustrating doing business with banks, customers go through hell even when they transact simple banking business, but recently, the use of information and communication technology has dominated the world through the use of electronic banking, banks and other financial institutions use this medium to offer a wide range of bank services from account services and customers relations to selling of various financial products. Transaction can be carried out by Nigerians using their debit card or credit cards.

According to Heli (2006), electronic banking is one area of e- commerce that has proven successful in Nigeria, virtually all banks in Nigeria offers online and real time banking services. Moreover, banks in Nigeria that cannot offer these services are increasingly losing their customers, however, one way where by transactions are more easier is the use of the automated teller machine (ATM).

According to peter and Sylvia (2008), an automated teller machine (ATM) combines a computer terminal, record keeping system, card cash vault in one point, permitting customers to enter a financial firms book keeping system with either a plastic card containing a personal identification number (PIN) or by punching a special code number into a computer terminal linked to the financial firms computerized records 24 hours a day.

In the recent years card frauds on a global level present a big challenge for the banks, card organizations, merchants and last but not least for the cardholders. The latter’s trust in bank cards as a main electronic payment instrument has been severely compromised. Therefore preventing card fraud is of paramount importance to everyone. ATM is a computerized telecommunication device that allows customers of a bank or financial institution with access to financial transactions, sometimes in locations outside the banking halls, minimizes risk associated with large movement of cash and eases payment of bills, taxes, utilities etc. it usually contains a magnetic strip that stores account information's.

Afam (2009) also ascertained that ATM fraud has taken an alarming proportion and most customers are now afraid to use their cards, there is no doubt that there must be collusion between some bank staff and fraudsters to commit these fraud and for such fraud to be successful. This is one of the reasons why customers are afraid about the security of online transactions. While on the other hand, some customers have not helped matters because of their carelessness or fraudulent nature, all these have given rise to ATM challenges in the banking industry.

This project work examines and assesses the ways by which these fraudsters carry out the fraud affecting our banking industry and customers patronage to banks.

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1.3 Statement of Problem

There are difficulties experienced in the manual system or fraud detection in financial sectors. These factors therefore necessitate the implementation of a computer – base system in other to overcome the short comings of the manual system of detecting fraud.

1. Inefficiency or poor management: If the management or institutions are poor in management, then it can never be fully achieved.
2. Lack of adequate controls can open the door to theft and/or fraud: ATMs require a high degree of additional control beyond the existing one. Institutions need to make sure they are able to track funds that have been deposited into the ATMs but not yet accounted for in central accounts as fraud or errors may be involved with the deposit. Service providers can supply institutional support to fully integrate controls.
3. Lack of understanding of client demand for and willingness to adopt ATMs can lead to failed implementation. When initiating new technologies such as offering financial services through ATMs, institutions must be prepared to educate clients on the benefits and train customers on the use of the new technology.
4. Failure to adequately consider the implications of ATMs on the business financial and operational performance. If financial service providers do not fully calculate the cost of the ATMs on the institution (purchase, installation, maintenance, staff and client training, new controls) it will be unable to understand the cost-benefit of using the new machines and could end up with a poor investment.

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1.4 Aim and Objectives of Study

The aim of the study is to assess the ATM Lock Cards Feature on Mobile Banking Application prevent measures needed in detect the Use of Fake or Stolen ATM Cards. In achieving this aim, the following specific objectives were laid out as follows:

1. To know the relationship between ATM fraud and Fake or Stolen ATM Cards usage
2. To examine the ways by which the Introduction the ATM Lock Cards Feature on Mobile Banking Application prevents the use of stolen ATM Cards.
3. To know the measures that central bank of Nigeria has taken to mitigate this fraud from stolen or fake ATM Card usage.
4. To know the reactions of the customers affected by fraud from stolen ATM Cards.
5. To investigate the reactions of banks when these frauds are committed and how it affects financial institution growth.

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1.5 Research Questions

The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:

• Is there any relationship between ATM fraud and fake ATM Cards usage?
• What are the ways by which the Introduction the ATM Lock Cards Feature on Mobile Banking Application prevents the use of stolen ATM Cards?
• How will the central bank of Nigeria stop the Use of Fake or Stolen ATM Cards from the introduction of ATM Lock Cards Feature on Mobile Banking Application?
• How can the customers and users of ATM avoid the risk of being defrauded from stolen ATM Cards from stolen ATM Cards?
• What are the solutions to fraud in Nigeria from stolen ATM Cards?
• How does fraud affect financial institution growth from stolen ATM Cards usage?

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1.6 Research Hypothesis

In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.

• H₀1: There is a significant relationship between ATM fraud and Fake or Stolen ATM Cards usage in Nigeria
• H₀2: The use of stolen ATM card in fraudulent activities does not affect customers’ patronage and financial institution growth.
• H₀3: There is no significant effect of ATM Fraudulent activities from stolen or fake ATM cards in the Nigeria banking industry

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1.7 Significance of Study

This study will be of immense benefit to Banking Industry and other researchers who intend to know more on this study and can also be used by non-researchers to build more on their research work. This study contributes to knowledge and could serve as a guide for other study.

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1.8 Scope of Study

The scope of the research is focused on the Prevention of the Use of Fake or Stolen ATM Cards by Introducing the "ATM Lock Cards" Feature on Mobile Banking Application.

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1.9 Limitations of the Study

During the course of this study, many things militated against its completion, some of which are:

1. Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
2. Research material: availability of research material is a major setback to the scope of the study.
3. Frequent power failure: This made the researcher append more money on fuel to ensure sustainable power.
4. Financial Constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

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1.10 Definition of Terms

Fraud: Is defined as deception deliberately practiced with a view of gaining an unlawful or unfair advantage.

Economic Crime: This is the manifestation of criminal act done either solely or in an organized manner with or without associates or group with the propose earning wealth or being rich through all illegal means.

Identity Theft: This is an action that proceeds enable a fraud to occur.

False Billing Fraud: This occurs when a business or an individual receives a bill for a product whereby the representation of the product by the promoter was either false or misleading or whereby the product were either never ordered or received.

Internet Fraud: This refers generally to any type of fraud scheme that uses one or more components of the internet such as chat room, e-mail, message boards or websites to present fraudulent transactions or to transmit the proceed of fraud into in financial institutions or to others connected with the scheme.

Password: This is a measure of protection against intruders from gaining access to the documents and secretes information.