Digital Financial Services (DFSs) are financial services that are accessed and delivered through digital technologies such as mobile phones.
Promotion of cashless transactions through Digital Financial Services in the wake of the COVID-19 pandemic is attributed to have had a positive impact on financial inclusion in Zambia.
However, since 2020, the increased use and adoption of Digital Financial Services has seen a corresponding increase in cases of cybercrimes and fraud especially for mobile phone-based transactions such as mobile money.
While mobile money has been a key driver for increasing financial inclusion, most rural people have been skeptical and slow to adopt Digital Financial Services particularly mobile money due to vulnerability to fraud.
Fraudsters target consumers of Digital Financial Services using mobile phones and a number of people have lost their money in rural and urban areas.
In 2020, RUFEP under the Strategic Partnership Component partnered with the Zambia Information Communication Technology Authority (ZICTA) to enhance safety and security of Digital Financial Services and to promote financial inclusion.
Under the partnership agreement with RUFEP, ZICTA is further mandated to educate consumers about the benefits and risks of Digital Financial Services to promote increased uptake and usage.
From the 23rd-24th May, 2022, ZICTA convened a Stakeholders Consultative Workshop bringing together key stakeholders and regulators of the Digital Financial Services ecosystem to deliberate on regulation of DFSs in the wake of increasing cases of cybercrimes and fraud.
Among the stakeholders included Bank of Zambia as a Financial Sector regulator, Mobile Network Operators (MNOs), the Zambia Police, Competition and Consumer Protection Commission (CCPC), the Financial Intelligence Center (FIC), Bankers Association of Zambia (BAZ) and Mobile Money Agents.
Speaking at the official opening of the Workshop, RUFEP Programme Coordinator Michael Mbulo said RUFEP recognized the important role Digital Financial Services play in the economic and social development of Zambia.
“The increased cases of DFSs fraud threatens the potential growth of the sector by compromising the quality of services offered, innovation in the sector, consumer satisfaction and security”, Mr. Mbulo said.
Speaking at the same occasion, ZICTA Acting Director General Mrs. Pethel Phiri thanked RUFEP for the partnership with ZICTA aimed to enhance security and safety of Digital Financial Services.
Mrs. Phiri said the workshop brought together key stakeholders who were interdependent on each other to ensure safety and security of Digital Financial Services.
ZICTA’s Manager Consumer Protection and Compliance Mr. Edgar Mlauzi said consumers might not know where to channel their grievances as issues` of fraud and cybercrimes were cross-cutting between regulators due to convergence of technology.
Mr. Mlauzi said there was need to look at regulatory overlaps of DFSs as ZICTA has always been blamed on cases of fraud due to lack of properly defined mandates for each regulator in the Digital Financial Services ecosystem.
“ZICTA’s mandate is to ensure that every area has Information Communication Technologies (ICTs) with good quality. As a result of ICTs, mobile phone booths are reaching the unbanked. On cybercrimes and fraud related cases, ZICTA is always blamed and yet the Bank of Zambia (BoZ) regulates financial services”, he said.
And ZICTA Legal Officer Alick Mponela said ZICTA’s role in the regulation of DFSs is secondary or supportive by licensing ICT service providers and ensuring quality of services.
Bank of Zambia, Manager for Research and Policy Mrs. Maureen Mulenga said it was not the mandate of the central bank to resolve customer complaints adding that the financial regulator only comes in when a service provider fails to provide recourse to consumer complaints.
“Most of the consumer complaints can be handled at the first point of call without coming through to the regulator. Service providers such as Mobile Network Operators (MNOs) should make it clear how consumers should get hold of them in case of complaints”, Mrs. Mulenga said.
Meanwhile, Mrs. Mulenga disclosed that the central bank has beefed up its Oversight Section in the wake of increasing cases of cybercrimes and BoZ was in the process of revising regulatory frameworks such as National Payment Systems Act Directives (2018) for Digital Financial Services.
Police Fraud and Cyber Crimes Unit Chief Inspector Geoffrey Zyambo said law enforcement is always lagging behind as cybercrimes and fraudsters keeps on evolving to beat the systems.
Inspector Zyambo said there was need for a collaborative framework for law enforcement agencies and regulators of Digital Financial Services.
The two days’ Workshop was attended by all the Mobile Network Operators (MNOs) in Zambia namely MTN, Airtel and Zamtel.
On the second day all MNOs made presentations on what they were doing as service providers of Digital Financial Services on Risk Management in the wake of increasing cases of fraud.
Identity theft and issuance of pre-registered SIM Cards was cited as some of the types of fraud used by fraudsters to commit cybercrimes.
At the same occasion, the Institute of Risk Management Zambia Executive Director Mr. Francis Ziba called for the need to invest in risk management as organizations that fail to mitigate risks puts their reputation at risky.
Going forward, all the stakeholders recommended the need to have a collaborative framework to bring up all key players and spell out each regulators’ mandate in the regulation of Digital Financial Services.