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CYBERSECURITY RISKS AND FRAUD PREVENTION IN DIGITAL BANKING: A STUDY OF MOBILE AND INTERNET BANKING PLATFORMS IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

The advent of digital banking in Nigeria has marked a pivotal shift in the financial sector, driven by fintech innovations that have expanded access to financial services for millions of users. This transformation has been fueled by the proliferation of mobile and internet banking platforms, which have facilitated seamless transactions, enhanced financial inclusion, and supported economic growth in a largely cash-based economy. According to recent research, the fintech sector in Nigeria secured 30% of Africa’s $857 million in tech funding in 2024, underscoring the rapid expansion of digital financial services (Udo Udoma & Belo-Osagie, 2025). Electronic payments reached ₦1.08 quadrillion in 2024, an 80% increase from 2023, while POS transactions grew to 1.5 billion, up 7.1% from the previous year (Udo Udoma & Belo-Osagie, 2025).

However, this digital surge has introduced significant vulnerabilities, including heightened cybersecurity risks and fraud incidents that threaten the integrity of these platforms. Scholars note that while digital banking promotes efficiency, it exposes users to sophisticated threats such as phishing, ransomware, and data breaches (Metibemu, 2025). In Nigeria, the adoption of digital banking has grown substantially, with banks like Fidelity Bank reporting a customer base of 9.1 million accounts and 92% of transactions conducted digitally in 2024 (Fidelity Bank, 2025). Similarly, TAJBank’s introduction of the TAJWay platform in 2024 reached over 368,810 customers, emphasizing mobile access and financial inclusion (TAJBank, 2025).

Despite these advancements, the sector faces persistent challenges. Research indicates that phishing accounts for 35% of cyber incidents in digital banking, with average losses of $5.5 million per incident, while ransomware constitutes 20% of attacks, averaging $7.1 million in damages (Metibemu, 2025). In the Nigerian context, the rapid digital transformation has outpaced infrastructure development, leading to increased exposure to fraud and breaches (Udo Udoma & Belo-Osagie, 2025). Banks have responded by implementing advanced measures, such as ISO 27001 certifications for information security and AI-driven fraud monitoring systems (TAJBank, 2025). Fidelity Bank’s electronic banking penetration stood at 52.8% in 2024, supported by robust security protocols like two-factor authentication and real-time monitoring (Fidelity Bank, 2025).

The evolution of digital banking in Nigeria is also reflected in regulatory efforts to balance innovation with security. Over 400 licensed digital lenders operate in the country, contributing to a 63.7% increase in remittances to $3.82 billion in 2024 (Udo Udoma & Belo-Osagie, 2025). Yet, the dual nature of this progress is evident: while it drives inclusion, it amplifies risks, necessitating ongoing research into effective prevention strategies (Metibemu, 2025). This background highlights the need for comprehensive studies on cybersecurity and fraud in Nigeria’s digital banking landscape to sustain growth and user confidence.

The advent of digital banking in Nigeria has marked a pivotal shift in the financial sector, driven by fintech innovations that have expanded access to financial services for millions of users. This transformation has been fueled by the proliferation of mobile and internet banking platforms, which have facilitated seamless transactions, enhanced financial inclusion, and supported economic growth in a largely cash-based economy. According to recent research, the fintech sector in Nigeria secured 30% of Africa’s $857 million in tech funding in 2024, underscoring the rapid expansion of digital financial services (Udo Udoma & Belo-Osagie, 2025). Electronic payments reached ₦1.08 quadrillion in 2024, an 80% increase from 2023, while POS transactions grew to 1.5 billion, up 7.1% from the previous year (Udo Udoma & Belo-Osagie, 2025).

However, this digital surge has introduced significant vulnerabilities, including heightened cybersecurity risks and fraud incidents that threaten the integrity of these platforms. Scholars note that while digital banking promotes efficiency, it exposes users to sophisticated threats such as phishing, ransomware, and data breaches (Metibemu, 2025). In Nigeria, the adoption of digital banking has grown substantially, with banks like Fidelity Bank reporting a customer base of 9.1 million accounts and 92% of transactions conducted digitally in 2024 (Fidelity Bank, 2025). Similarly, TAJBank’s introduction of the TAJWay platform in 2024 reached over 368,810 customers, emphasizing mobile access and financial inclusion (TAJBank, 2025).

Despite these advancements, the sector faces persistent challenges. Research indicates that phishing accounts for 35% of cyber incidents in digital banking, with average losses of $5.5 million per incident, while ransomware constitutes 20% of attacks, averaging $7.1 million in damages (Metibemu, 2025). In the Nigerian context, the rapid digital transformation has outpaced infrastructure development, leading to increased exposure to fraud and breaches (Udo Udoma & Belo-Osagie, 2025). Banks have responded by implementing advanced measures, such as ISO 27001 certifications for information security and AI-driven fraud monitoring systems (TAJBank, 2025). Fidelity Bank’s electronic banking penetration stood at 52.8% in 2024, supported by robust security protocols like two-factor authentication and real-time monitoring (Fidelity Bank, 2025).

The evolution of digital banking in Nigeria is also reflected in regulatory efforts to balance innovation with security. Over 400 licensed digital lenders operate in the country, contributing to a 63.7% increase in remittances to $3.82 billion in 2024 (Udo Udoma & Belo-Osagie, 2025). Yet, the dual nature of this progress is evident: while it drives inclusion, it amplifies risks, necessitating ongoing research into effective prevention strategies (Metibemu, 2025). This background highlights the need for comprehensive studies on cybersecurity and fraud in Nigeria’s digital banking landscape to sustain growth and user confidence.

1.2 Statement of the Problem

Nigeria’s digital banking sector is plagued by escalating cybersecurity risks and fraud, resulting in substantial financial losses, operational disruptions, and eroded user trust. Fraud losses in the financial sector rose by 23% to ₦17.7 billion in 2023, up from ₦11.6 billion in 2020 and ₦3 billion in 2019 (Udo Udoma & Belo-Osagie, 2025). In 2024, Fidelity Bank reported 2,249 fraud incidents involving ₦937 million, with actual losses of ₦11 million, down from 3,079 incidents and ₦2.09 billion in losses in 2023 (Fidelity Bank, 2025).

Prevalent threats include phishing, ransomware, SIM swap attacks, and insider threats, which exploit vulnerabilities in mobile and internet platforms (Metibemu, 2025). Phishing alone accounts for 35% of incidents, causing average losses of $5.5 million, while ransomware leads to $7.1 million per event (Metibemu, 2025). In Nigeria, the surge in digital transactions such as 1.5 billion POS transactions in 2024 has amplified these risks, outpacing cybersecurity infrastructure (Udo Udoma & Belo-Osagie, 2025).

These issues are compounded by regulatory gaps, low digital literacy, and inadequate mitigation strategies, leading to non-performing loan ratios of 3.0% in 2024 and cost of risk at 1.5% (Fidelity Bank, 2025). TAJBank’s focus on fraud monitoring and risk assessment frameworks highlights ongoing vulnerabilities, with operational risks including cybersecurity identified as major concerns (TAJBank, 2025). Without targeted interventions, these threats jeopardize the stability of Nigeria’s digital banking ecosystem, hindering adoption and economic progress (Metibemu, 2025).

Nigeria’s digital banking sector faces significant cybersecurity challenges, including increasing fraud and operational risks, which have led to substantial financial losses, service disruptions, and diminished consumer confidence. According to Udo Udoma & Belo-Osagie (2025), financial sector fraud losses increased by 23% to ₦17.7 billion in 2023, rising from ₦11.6 billion in 2020 and ₦3 billion in 2019. Fidelity Bank (2025) reported 2,249 fraud cases totaling ₦937 million in 2024, with actual losses amounting to ₦11 million, a decline from 3,079 incidents and ₦2.09 billion in losses recorded in 2023.

Primary cyber threats include phishing, ransomware, SIM swap fraud, and insider threats, all of which target weaknesses in mobile and internet banking platforms (Metibemu, 2025). Phishing accounts for 35% of cybersecurity incidents, with an average loss of $5.5 million per occurrence, while ransomware results in losses averaging $7.1 million per attack (Metibemu, 2025). The rapid expansion of digital transactions in Nigeria, exemplified by 1.5 billion POS transactions in 2024, has exacerbated these risks, outpacing the development of adequate cybersecurity measures (Udo Udoma & Belo-Osagie, 2025).

These challenges are further intensified by insufficient regulatory oversight, low digital literacy rates, and ineffective risk mitigation strategies, contributing to a non-performing loan ratio of 3.0% and a cost of risk at 1.5% in 2024 (Fidelity Bank, 2025). TAJBank (2025) emphasizes the persistent vulnerabilities in fraud monitoring and risk management frameworks, identifying cybersecurity as a critical operational risk. Without strategic interventions, these threats undermine the stability of Nigeria’s digital banking infrastructure, impeding financial inclusion and economic development (Metibemu, 2025).

1.3 Objectives of the Study

The general objective of this study is to examine cybersecurity risks in mobile banking platforms in Nigeria.

The specific objectives are:

1. Identify prevalent cybersecurity risks in Nigerian digital banking.
2. Assess impact of these risks on user adoption.
3. Evaluate existing fraud prevention measures.

1.4 Research Questions

1. What are prevalent cybersecurity risks affecting mobile banking in Nigeria?
2. What are prevalent cybersecurity risks affecting internet banking in Nigeria?
3. How do these risks influence user adoption in digital banking platforms?

1.5 Significance of the Study

This study offers critical insights for stakeholders in Nigeria’s financial sector. Regulators such as the Central Bank of Nigeria can leverage findings to address threats like phishing, which accounts for 35% of incidents (Metibemu, 2025). Banks benefit from recommendations on AI-driven detection to curb losses, as seen in Fidelity Bank’s reduction in fraud incidents from 3,079 in 2023 to 2,249 in 2024 (Fidelity Bank, 2025).

Users gain awareness of risks such as ransomware, promoting safer practices (Metibemu, 2025). Academically, it enriches literature on cybersecurity in emerging markets, highlighting the need for robust frameworks (Udo Udoma & Belo-Osagie, 2025). Overall, the research fosters sustainable inclusion by mitigating vulnerabilities that impede trust and development.

1.6 Scope of the Study

This study investigates cybersecurity risks in mobile banking platforms in Nigeria. It analyzes trends from 2020 to 2025, based on scholarly sources focusing on deposit money banks. The scope encompasses threats like phishing, ransomware, and insider attacks. It excludes traditional banking and non-financial sectors. Geographically, it centers on Nigeria, covering urban patterns.

1.7 Limitations of the Study

The study depends on secondary data from reports, potentially missing 2026 updates. Proprietary data access is limited, constraining fraud analysis depth. Cyber threats evolve rapidly, so post-2025 risks may be underrepresented. Nonetheless, recent studies ensure relevance.

1.8 Definition of Terms

• Cybersecurity Risks: Vulnerabilities to digital systems, encompassing hacking. Vulnerabilities to digital systems, encompassing malware. Vulnerabilities to digital systems, encompassing breaches.
• Fraud Prevention: Measures including encryption. Measures including multi-factor authentication. Measures including AI detection to counter fraud.
• Digital Banking: Services via mobile apps for transactions. Services via internet platforms for account management.
• Mobile Banking: Services accessed through devices, via apps. Services accessed through devices, via USSD codes.
• Internet Banking: Banking via browsers. Banking via portals.
• Phishing: Deceptive efforts to acquire sensitive data via messages. Deceptive efforts to acquire sensitive data via websites.
• Ransomware: Malware encrypting data, requiring ransom.
• SIM Swap Fraud: Unauthorized SIM transfer to hijack verifications.

References

Fidelity Bank. (2025). Fidelity Bank Plc annual report and financial statements for the year ended 31 December 2024. https://www.fidelitybank.ng/documents/2024-Fidelity-Bank-Annual-Report.pdf

Metibemu, O. C. (2025). Financial risk management in digital-only banks: Addressing fraud and cybersecurity threats in a cashless economy. Asian Journal of Research in Computer Science, 18(3), Article 603. https://doi.org/10.9734/ajrcos/2025/v18i3603

Nigeria Inter-Bank Settlement System. (2025). NIBSS fraud landscape report 2024. (As cited in multiple secondary sources including Nairametrics and TechCabal Insights reports on 2024 fraud statistics).

Oyamendan, A., & Oyamendan, G. C. J. (2026). The impact of cybersecurity risks in fintech and mobile banking adoption in Nigeria. Journal of Arid Zone Economy. https://doi.org/10.63660/jaze.2025.0601.007

Okonkwo, C. J., & Okonkwor, O. S. (2025). The impact of cyber-attacks on Nigerian banks and strategies for mitigation. International Journal of Science and Research Archive, 15(2), 758–761. https://doi.org/10.30574/ijsra.2025.15.2.1419

TAJBank Limited. (2025). TAJBank Limited audited financial statements for the year ended 31 December 2024. https://tajbank.com/wp-content/uploads/2025/08/2024-TAJBank-Full-Year-audited-accounts-1.pdf

Udo Udoma & Belo-Osagie. (2025). Fintech regulatory update and insights 2025. https://uubo.org/ (Relevant sections on fintech funding, digital payments growth, and regulatory developments in Nigeria for 2024–2025).