Nigerian Fintech Company Interswitch Grapples With N30 Billion Loss Due to Chargeback Fraud, Launches Recovery Process
Interswitch, a prominent player in the Nigerian payments industry, has reported a N30 billion loss due to chargeback fraud and is now actively working on recovering these funds.
Chargeback fraud typically occurs when a customer makes a purchase using a credit or debit card and later disputes the transaction, claiming that it was unauthorized or fraudulent. As a result, the funds are reversed, and the merchant is liable for the amount.
Reports reveal that Interswitch has swung into action to recover the funds through legal means, after filing a report at the Economic and Financial Crimes Commission (EFCC), Nigeria’s anti-money laundering agency.
So far, the fintech giant is reported to have recovered N10 billion, which is only a fraction of the amount lost.
According to court documents seen, Interswitch filed a motion at the court of the suspected bank accounts. The fintech company has also mandated 54 banks to place restrictions on hundreds of suspected bank accounts until the investigation and recovery process is complete.
According to two sources familiar with the situation as reported by TechCabal, the chargeback fraud had been ongoing for several years although they did not provide a specific timeline. The recent incident is believed to be connected to former and current Interswitch employees who may have taken advantage of weaknesses in the company’s system.
Lately, Fintechs in Nigeria have been experiencing significant financial losses due to hacking incidents, resulting in the loss of over N5 billion.
Interswitch N30 billion loss is a substantial amount, and it underscores the importance of robust fraud prevention and chargeback management systems in the payments industry.
While Interswitch’s experience is concerning, it serves as a reminder that ongoing vigilance, investment in security measures, and effective responses to fraud incidents are crucial for financial institutions and payment service providers.
