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Chat Banking in Africa – protecting the potential

Chat banking is set to change the way people transact across the Africa. But this convenient new channel could pose risks to consumers

Chat banking, allowing users to transact simply and easily on the messaging apps they prefer, is likely to become the next big thing in banking across Africa.

The continent’s highly mobile-enabled population already embraces messaging apps and an emerging younger consumer base is more comfortable texting than speaking on their devices.  GSMA’s The Mobile Economy 2019 report indicates that in West Africa alone, there are over 185 million unique mobile subscribers, with future growth to be driven by the fast-expanding young consumer market. This young market is less voice-centric and more inclined to use data-centric, non-core communications services, such as online gaming and video streaming. In terms of communications, messaging platforms have a high penetration, with We Are Social and Hootsuite’s annual Global Digital Yearbook for 2019 indicating that WhatsApp has 1.5 billion active accounts and Facebook’s Messenger 1.3 billion globally.

This new environment paves the way for the mainstreaming of  chat banking, which – due to the fact that it is hosted on a messaging app – supports more conversational language in the engagement. Chat banking also makes it possible to share interactive multimedia, including pictures, sound clips and video, which traditional banking apps cannot easily do.

Because chat banking is hosted within platforms consumers feel at home in, the bank itself becomes part of the consumer’s ‘circle of friends’. This means the consumer can engage from within their familiar environment and does not have to navigate away to a banking app. In addition, this interaction creates a more personalised perception of the engagement. Research shows that consumers find personalisation increasingly important. Epsilon, for example, found that 90% of consumers find personalisation appealing and 80% are more likely to do business with a company that offers personalised experiences.

Aside from the built-in feature richness and familiar feel messaging apps deliver, banking over these channels can also benefit from customised messaging bundles often sold by mobile service providers. These bundles, supporting particular messaging apps at a discounted rate, may prove more cost effective for consumers than the regular data bundles required for traditional mobile banking through apps. If consumers are purchasing data just to engage on WhatsApp or Facebook, it makes sense to bring banking to them.

While chat banking offers consumers new levels of convenience and an improved customer experience, it does raise the question of security. To ensure that it delivers on its potential, chat banking has to be fully secured to avoid it becoming yet another channel for fraudsters to exploit.

Across Africa, SIM swap fraud may pose the biggest risk to chat banking. SIM swap fraud, in which a criminal switches a victim’s phone number to a SIM card they possess, allows criminals to divert incoming messages – including social and messaging content. Should fraudsters then take control of a user’s mobile number, they could potentially gain access to the victim’s chat banking. In South Africa, SIM swap fraud incidents more than doubled last year,topping 8,254 cases between January and August, according to the South African Banking Risk Information Centre (Sabric). In Kenya, our research last year found that over 90% of Kenya banking leaders identify SIM swap fraud as an issue for their organisations and the broader market.

To effectively secure chat banking and ensure that trust in the process is not compromised, financial services will have to guard against the risk of SIM swap fraud by providing out of band authentication and SIM swap detection.

Myriad Connect offers financial service institutions secure authentication and SIM swap detection services, using a discrete channel for authentication separate from the browser or online channel being used by the customer to initiate a transaction. Myriad Connect’s session-based service sends an advanced push notification to open up a conversation between the enterprise and customer.  Myriad’s SIM Swap detection service provides a real time check on the SIM, while no persistent data is held with any third party, providing a more secure service than current two factor authentication services. A clear audit trail is also established, where the user’s identity is verified by a party external to the transaction.

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