Kenyan SACCOs in Shooting Range as Cyber Criminals Take Aim

By Jackson OKOTH

In today’s AI-powered financial world, individuals, especially millennials, are opting for virtual and more convenient tech-driven options to do their daily transactions, rather than visit a physical office.

 

This rapidly growing trend has prompted Savings and Credit Cooperative Societies(SACCOs) to re-tool their delivery channels, and product offerings.

 

Now, SACCOs are busy developing new digital credit and loan products, to fight off competition from banks and emerging Digital Credit Providers. Here lies the devil.

 

These cutting-edge and sophisticated electronic- enabled products are exposing these SACCOs to cyber threats, attacks, and related frauds, hitherto unknown to their traditional business models.

 

 Majority of SACCOs have mobile phone and internet connectivity and are exploiting the opportunity provided by the two virtual delivery platforms, to offer more sophisticated digital credit and loan offerings.

 

Many have partnered with Fintechs to venture into the provision of mobile money, internet banking and digital credit financial services.

 

SACCOs have also hooked onto networks of banks, in order to provide ATMs. credit or debit card services, Pesalink as well as cheque issuance, clearance and settlements.

 

“Our digital branch of business is now the fastest growing segment. Most members prefer the phone and other digital platforms to do most of their transactions,” said David Mategwa, Chairman of the Kenya Police SACCO.

 

In addition to use of the mobile phone and internet-enabled platforms, SACCOs are also installing agency business models, to complement their physical branches.

 

The bulk of transactions at the SACCO agency outlets, which are cheaper to set up and run as opposed to banking halls, consists of cash deposits and withdrawals.

 

Although SACCOs have made this huge technology lip, danger lurks in the background. In a quest to go tech, SACCOs are also exposed to cyber risks and threats associated with these virtual service delivery channels.

 

“Periodic analysis and intelligence monitoring reports indicate that major cyber-attacks and security breaches within the SACCO sub-sector occur during long weekend public holidays.

 

The trends equally show that these breaches and attacks are predominantly perpetrated during the last 12 hours prior to commencement of these long weekend public holidays and during the late evening and early night hours over these long weekend public holidays,” said Sacco Societies Regulatory Authority(SASRA) in an alert issued in April this year.

 

As more SACCOs move their financial products into the digital arena, the more attractive they become soft targets for cyber criminals.

 

 “Consumer education is not a luxury or an afterthought but a core activity for all stakeholders. This is the only way that our digital world will thrive,” said Mr. David Mugonyi, Communication Authority(CA) Director General in February this year.

 

Emerging technologies such as artificial intelligence (AI) are complicating matters. “With generative AI, fraudsters can create more credible-looking content and with machine learning and automation, they can develop malware and viruses that adapt to system defences.” said Mr Mugonyi.

The exact amounts SACCOs are spending to prevent cybercrime vary widely and are not publicly disclosed. But many of these SACCOs are deploying various security measures including employee training, system upgrades, and fraud detection tools.

Depending on their pockets, size, the complexity of their systems, and their risk profile, SACCOs are doing huge investments in acquiring the latest Security software and hardware, robust Fraud Detection Systems, and ensuring compliance with data privacy and cybersecurity-related regulations.