COMPLETE SCHOOL PROJECT TOPICS & MATERIALS :
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CHAPTER ONE

INTRODUCTION

1.1 Background of the study
Since the introduction of the plastic pay card in 1946 by John Biggins, a banker in Brooklyn, the use of cards have steadily grown to large numbers. According to the U.S. Census Bureau there were 159 million credit cardholders in the U.S. in 2000, 173 million in 2006 and that number is projected to grow to 181 million by 2010. (US Census Bureau, 2009). That success leaded to the formation of bank card associations like Mastercard Amex and Visa. Today bank card associations are large international corporations offering standardized services throughout the world. The vast growth of the payment card industry (PCI) in the last 50 years has placed the industry in the centre of attention, not only because of this growth, but also because of the increase of fraudulent transactions. The European Commission reports estimated credit card fraud in European Union is between €500 en €1000 million (APACS, 2008; FPEG, 2009; European Commission, 2008).
Fraud has been in existence throughout history and has taken many different dimensions. Bank fraud has grown with advent of the banking industry, and has been facilitated by the technological innovations and the widespread use of the Internet. According to the fraud triangle (Cressey, 2003) for fraud to occur the three factors; pressure, rationalization and opportunity should be present. Bank employees have knowledge of the systems as well as classified and confidential information which together with technological advancement can give them the opportunity to commit frauds. All they need is some pressure and the rationalization and that way they become part of fraud cartels that are fleecing millions of shillings from the banks.
The conducted research in the domain of credit card fraud reduction has produced statistical reports on detection of fraud, and ways of protection. On the other hand, the relevant body of research is quite partial and covers only specific topics. For instance, the provided reports related to losses due to fraudulent usage of cards usually do not present the measures taken to combat fraud nor do they explain the way fraud happens. Many different efforts of combating fraud are mostly individual efforts of banks or other organizations directly connected to end customers. This can turn out to be confusing and makes one believe that card usage can be more negative than positive. The motivation behind this research is to shed some light to the worldwide spread fraud problem in the PCI. The PCI gathers payment organizations, as well as banks, merchants and cardholders. Other organizations involved are plastic card manufacturers, terminal and ATM vendors, certification organizations and software providers. So the number of stakeholders that are benefitting from the popularity of the PCI is large. It is therefore paramount that a deep understanding of the overall pay card fraud mechanisms and the Information Technology that can be helpful in combating the fraud, is established.

1.2 Statement of the problem
The regularity of fraud and misappropriation of funds is creating fear, anxiety, and a loss of confidence in the minds of bank customers.
Munyua (2013) focused on operational response strategies to payment card fraud by commercial banks in Kenya and concluded that a mix of operational strategies have been employed by commercial banks. However, the study was narrow as it only focused on credit card fraud only.
Njagi (2009) did a study on the effectiveness of know your customer policies adopted by commercial banks in Nigeria in reducing money laundering and fraud incidences and concluded that KYC controls had a significant effect on the fraud incidences in commercial banks. However, the conceptual scope of the study was narrow as it only focused on prevention mechanisms. Kiprop (2010) carried out a study on responses to fraud related challenges by Barclays bank of Nigeria and concluded that the bank had put in place fraud detection systems. However, the study failed to assess the effectiveness of the fraud detection systems that had been put in place. Munyua (2013) focused on operational response strategies to payment card fraud by commercial banks in Nigeria and concluded that a mix of operational strategies have been employed by commercial banks. However, the study was narrow as it only focused on credit card fraud only. Wanyama (2012) investigated the effectiveness of fraud response strategies adopted by co-operative bank of Nigeria limited and concluded that that ineffective strategies cannot adequately control fraud. The study was narrow in scope as it only concentrated on one bank.

1.3 Objectives of the study
The main objective of the study is to examine the relationship between increase in card payment and fraud rates.
1. To investigate on how card payment as led to increased fraud rates.
2. To examine the role of Information Technology in combating card payment fraud?
3. To assess the effect of the implementation of Information Technology in combating card payment fraud.

1.4 Research questions
This paper is intended to provide accumulative and organized information of the efforts made to protect businesses from fraud. We try to reveal the effectiveness and efficiency of the current fraud combating techniques and show that organized worldwide efforts are needed to take care of the larger part of the problem.
The research questions that will be addressed in this study are:
1. How has card payment led to increased fraud rates?
2. How can Information Technology help in combating card payment fraud?
3. Is the implemented Information Technology effective and efficient enough to bring progress in combating card payment fraud?

1.5 Significance of the study
The findings are expected to have implications on policy, practice and theory building. In relation to policy and practice, the findings of the study are also expected to be important to the management of the commercial banks to maintain an enhanced controlled environment by helping management and employees to establish and maintain an environment throughout the bank that sets a positive and supportive altitude towards internal control, reliable management, operating personnel for effecting internal control and internal audit for evaluating whether appropriate controls have been implemented and whether the internal controls are functioning as intended. The government through the Central Bank of Nigeria may use the study findings to formulate policies on risk management.

1.6 Scope of the study
The study sought to examine the relationship between increase in card payment and fraud rates. This study will also focus on banks in Edo state.

1.7 Limitations of the study
The following limitations were anticipated in this study:
1. Since the study was only carried out in only one province, the results may not be generalisable to the whole country. The researcher collected data on his own without research assistants.
2. Financial constraints were also anticipated in the current study. Although the researcher received assistance from the bursary, it was not possible to carry out the study at national level.
3. The researcher is a full time employee so time to carry out the study was limited.

1.8 Organization of Study
The study is organized into five chapters. Chapter one deals with the study’s introduction and gives a background to the study. Chapter two reviews related and relevant literature. The chapter three gives the research methodology while the chapter four gives the study’s analysis and interpretation of data. The study concludes with chapter five which deals on the summary, conclusion and recommendation.