Effect of bank verification number (BVN) on reducing fraud in Nigeria bank: A Case study of First Bank Nigeria Plc in Abuja.

CHAPTER ONE

INTRODUCTION

1.1   Background of the Study

The rate at which fraudulent activities is going on in the country these days is becoming unbearable; the federal government of Nigeria and the CBN have being on their toes to resolve the issue of frauds and to boost financial security in most of the Nigerian banking industry; as a strategy to curtail these obnoxious activities, the central bank of Nigeria on February, 2014 made it compulsory that all account holders should have a bank verification number so as to enable the account holder to have a single identity in all the banks in Nigeria. The essence of this system is to help the bank in the protection of their customers from theft and other financial crimes growing in the banking industry (Orji, 2014).

The role of Bank Verification Number (BVN) aimed at curtailing hazards associated with social security and credit risk cannot be underestimated. In recent times, biometric technologies have been used to analyze human characteristics as an enhanced form of authentication for real-time security processes. In the face of increasing incidents of compromise on our conventional security systems (password and PIN), the need for greater security on access to sensitive or personal information in the Banking system becomes inevitable (Blass and Oved, 2003).
In addressing existing challenges with identity management, the Central Bank of Nigeria, through the banker’s committee in collaboration with all Nigerian banks launched a centralized biometric identification system tagged “Bank Verification Number (BVN)”.

The Bank Verification Number (BVN) gives each Bank customer a unique identity across the Nigerian Banking industry that can be used for easy identification and verification at Point of Banking operations (Evangelista, 2001). Biometrics refers to identification of an individual based on physiological or behavioral attributes- fingerprint, voice, signature, facial features etc. Bank Verification Number (BVN) uses biometric technology to register customers in the financial system. It records these physical features which are unique to individuals – fingerprints and the face. The record would be used to identify the person afterwards. Once a person’s biometrics have been recorded, and BVN issued the account would be accessed through BVN. The major objectives of the initiative are to protect bank customers, reduce fraud and strengthen the Nigerian banking system.

Biometric enrolment is helpful to people who cannot read and write. Their finger prints and pictures would serve the same purpose as signatures (Claudio, 2002). Multiple account holders would be covered with a single registration in any of the banks where they have accounts. BVN will help the banking system reduce situations where loan defaulters, for instance, move from one bank to the other and the banks extend new credits to them, without knowing their history. Banks would be able to track transactions across all banks in Nigeria with more ease.

Customers Bank Accounts are protected from unauthorized access with the use of BVN. Through an enhanced biometric real-time security system, the danger of unauthorized access to customer’s bank account is brought under check. The BVN is encompassing in detecting fraud of whatever type, whether through unauthorized access or through illegally authorized forms, and any other forms of fraud that’s against the rule of law and social justice (De Meza and David, 2000).

It is also a plan to eliminate fear in banks and make the country to be in league with developed countries of the world, it is therefore imperative for all Nigerians to ensure that they are enrolled. It is believed that if the BVN enrollment is properly managed, it will not only enhance credit advancement to bank customers, but also reduce reported cases of scam, fraud, and account impersonation, while at the same time assist commercial banks in keeping authentic records of their clients (Shonubi, 2016).

Bank Verification Number is part of the Central Bank of Nigeria cashless policy to capture customer’s data and check fraud in the Nigerian Banking System a unique identification system that can be verified across all banks in Nigeria (Vanguard, 2015).

Therefore, this study seeks to assess the effect of bank verification number on reducing fraud in Nigeria bank with a particular reference to First Bank Nigeria Plc in Abuja.

1.2   Statement of the Problem

Without doubts, Nigerian banking sector has contributed to the growth and development of the country. The Nigerian banking sector has maintained the inflow of money in the country so as to stabilize the country’s economy. But in the face these important roles and functions being played by the sector, the banking industry has also come under serious blames and attacks for its involvement in fraudulent transactions, of money laundry, economic and financial crimes.

Fraud and money laundry have significant effect on the financial security in the Nigeria banking industry. They have caused damage to the reputation of the image of the country, loss of FDI, poor infrastructural development, dwindling confidence and distortions in our political as well as financial systems, among other things.

Many banks in the past had recorded bad debts, insolvency, and some even folding up because their customers defrauded them.  Fraudulent bank customers are found to borrow money without being to be tracked. This situation has made banks to often feel reluctant at extending credits and loans to genuine businesses and private individuals. It is however expected that with Bank Verification Number (BVN), customers who borrow from one bank and default would not go to another bank to borrow without being tracked due to a unified credit performance system as Credit Bureau and lenders would be able to effect ‘Know Your Customer’ policy by the CBN and fraudulent activities would be curtailed and banking activities would be monitored appropriately.

There is a dearth of empirical studies on the role of bank verification number (BVN) in reducing frauds in Nigeria bank. Moreover, the few available studies such as conducted by Esoimeme (2015), Adebayo and Topson (2014), and Udenze (2014) were theoretical studies in nature whose results were subjectively based on leading argument or logic. In this context, it is noted by the researcher that the past studies did not give adequate attention to the underlying effect of bank verification number on reducing fraud in Nigeria, as well as highlighting effective strategies for preventing bank frauds. Hence, the undertaking of this research work will fill in the gap by critically exploring the effect of bank verification number on reducing fraud in Nigeria bank with a particular reference to First Bank Nigeria Plc in Abuja.

1.3   Objectives of the Study

The major objective of the research work is to assess the effect of bank verification number on reducing fraud in Nigeria bank. The specific objectives of the study are:

1.   To examine the effect of bank verification number on financial crimes in Nigeria

2.   To investigate the impact of BVN system on financial safety in the Nigerian banking Industry.

3.   To examine the impact of implementing biometric security system on customers’ satisfaction in the Nigerian banking sector.

4.   To investigate the role of the Central Bank of Nigeria in the implementation of the bank verification number system

5.   To determine the threats and weaknesses of the implementation of Bank Verification Number (BVN).

1.4   Research Questions

This study will be guided be the following research questions:

1.   What is the effect of bank verification number on financial crimes in Nigeria?

2.   Does BVN system has a significant impact on financial safety in the Nigerian banking Industry?

3.   What is the impact of implementing biometric security system on customers’ satisfaction in the Nigerian banking sector?

4.   What is the role of the Central Bank of Nigeria in the implementation of the bank verification number system?

5.   Are there threats and weaknesses of the implementation of Bank Verification Number (BVN)?

1.5   Research Hypotheses

The researcher intends to test the following hypotheses:

Hypothesis 1:

Ho:    There is no significant effect of bank verification number on       financial crimes in Nigeria.

HI:      There is a significant effect of bank verification number on financial    crimes in Nigeria.

Hypothesis 2:

Ho:    BVN system has no impact on financial safety in the Nigerian    banking Industry.

HI:    BVN system has a impact on financial safety in the Nigerian       banking Industry.

Hypothesis 3:

Ho:    Implementing biometric security system does not aid customers’        satisfaction in the Nigerian banking sector.

HI:     Implementing biometric security system aids customers’ satisfaction in the Nigerian banking sector.

1.6   Significance of the Study