Company takes on 'fearmongering' Reserve Bank over warning not to pay via instant EFT
The CEO of a digital payments company has taken issue with the SA Reserve Bank’s warning to consumers not to pay online retailers via instant EFT because they are making themselves vulnerable to fraud.
“While there are some dubious companies, as with any industry, millions of consumers transact using the company’s safe instant EFT payment solution,” said Thomas Pays, CEO of Ozow.
“Focusing on obscure risks that are pervasive to the whole system seems to be fearmongering to protect historic revenue at the expense of the consumer value add.”
In statement issued jointly, the Reserve Bank, the Financial Sector Conduct Authority and the Payments Association of SA warned on Thursday, on the eve of Black Friday, that instant EFTs were done by means of a process called screen-scraping, which makes it possible for third parties to access a person’s bank account data and act on their behalf, using their banking access credentials.
“We do not support the use of screen-scraping to effect payments given that screen-scraping puts consumers’ access credentials at risk of being compromised,” they said.
“Consumers have no control over how their credentials and any other data or personal information is accessed by the third party — such as account numbers and account statements — and may be stored and used.”
In addition, fraudsters could pose as third parties offering “instant EFT” services on fake e-commerce sites to capture consumers’ access credentials for their bank’s internet banking websites, they warned.
They drove the message home by telling consumers: “If you make use of instant EFT products, you could be in breach of your bank’s terms and conditions, which regulate internet banking by providing their internet banking login credentials to a third party.
“As a result, consumers are, knowingly or unknowingly, giving up their rights of recourse and lack any legal protection in the event of fraud and subsequent loss suffered by such consumers.”
That alarmed Ozow users.
“Does this mean I can’t use Ozow any more?” Simphiwe Mahlangu tweeted.
“And it’s been so convenient.”
Pays said Ozow had reached a new milestone this month — R1bn in transactions for November alone — thanks to Black Friday, “with zero fraud incidents on the platform since inception six years ago”.
While acknowledging the three organisations as “strong protectors” of the SA financial system, having fostered systemic stability, consumer rights and one of the best payments systems in the world, Pays said their media statement about instant EFTs “raises questions around whether the legacy banking players are more focused on their income streams or their customers”.
This week, in its “Consultation Paper on Open-Banking Activities”, the Reserve Bank concluded that information currently available indicates the screen-scraping practice poses no significant risk to financial stability at this stage, Pays said.
“By contrast, the SA Banking Risk Information Centre’s (Sabric) annual crime report for 2019 showed total gross fraud losses for SA issued cards increasing by 20.5% from 2018 (R890.3m), to 2019 (R1.07bn).
“Credit card fraud increased by 16.2% from 2018 (R186.8m) to 2019 (R217.2m).”
Alternative payment systems such as instant EFTs were becoming increasingly popular because of their ease of use, Pays said, with no need to fill in card details for every transaction.
“Plus they drive financial inclusion as they open up the online shopping universe to people who don’t have debit or credit cards.”
Pays said instant EFTs allowed consumers to spend money they have “as opposed to money they don’t have”.