Is the rise in banking fraud correlated to job cuts?

May 1, 2023

When I went to tell my father that I am running an online media platform, I couched it in a certain phrase I felt he could relate to. His generation used to be asked a question on when to retire after sixty years, but mine, as soon as a computer can do your work or when your organization is restructuring, has its way out of financial turmoil.

And it clicked, he is a banker you know, who saw the first computers that had no mouse and everything they did was still being punched and filed. And a good storyteller, too, so he tells me, the other day he went to his bank, Barclays, now Absa and he found that the banking hall was rather empty.

So he is thinking back to his days; when the banking halls were full of people, someone had come to receive their salary, a tea bonus, or someone was just applying for a wad of personal chequebooks or sending money orders.

But here it was, the banking hall had been gutted out by the rise of mobile banking that has been steadily eliminating thousands of jobs over the years. What the Central Bank calls an efficacy score, is that for every banker that served 215 people fifteen years ago today, the same banker is serving ten times more people or 2,044 in this case for example

As every service disappeared onto the mobile phones, the attrition bled the banking halls you would only get one or two counters attended to, and it only made sense to turn to mobile banking than wait. And this was deliberate, according to Financial Sector Deepening, banks charged customers an arm and a leg to withdraw money over the counter in order to force them onto mobile banking platforms.

And I quote, ‘transactions done at the branch are the most expensive: For some banks, this is a strategy to push their customers towards digital channels’.

According to the 2022 Kenya Bankers Association (KBA) customer satisfaction survey, 67.8 percent of the participating respondents preferred mobile banking, a trend that gained traction with the onset of COVID-19 and continues to stay elevated which is consistent with the 2021 FinAccess survey findings that found mobile banking usage also increased between 2019 and 2021.

However, the bankers union saw the 78,371 and 1,010 agents contracted by 21 commercial banks and 5 microfinance banks (MFBs) respectively as the threat. In reality, however, it was the mobile since agency banking accounts for a mere 6.06 percent in the provision of services to customers according to KBA.

My old man related, he said he talked to the young men at his local bank branch and they are all on contract. He said the problem with contracted labour is that quite often, it is not committed. If you tell your house help that she will only be hired for the month and she has nowhere else to go, she will steal from you, my father said. He said this is even worse for institutions such as banks.

I wondered, for a minute if he had struck something. Hacking attacks on Kenya’s financial systems, including mobile banking, rose nearly three-fold to 444 million in the year ending June 2022 from 158.4 million a year earlier. This has been attributed to working from home which saw more retail purchases made online.

But the dreaded Forkbombo hackers were known to gain access to companies’ finance systems remotely, and through insiders who used to plant computers and other devices in server rooms. The Central Bank of Kenya has also warned that 34.5 percent and 25.9 percent of bank account holders attributed the loss to internal fraud and phone-related fraud.

So maybe, the old man is right; insiders and contracted workers being squeezed in the name of savings costs could be the banks’ worst nightmare.

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