Banks must ensure online security: Ombuds

The office of the Ombudsman for Banking Services (OBS) seems to be troubled by security in the exploding online banking trends.

This emerges from the 2012 annual report released last week which reflects an increase of 3% in internet banking fraud cases presented to the Ombudsman in that year. Cellphone banking fraud cases rose by 8%.

Advocate John Myburgh SC, chairman of the board of the OBS said with the increasing use of bank-pioneered cellphone, smartphone and near-field communication payment solutions, cash could soon follow cheques into redundancy.

He noted that the growing mobile customer base has spurred banks to launch ever-more innovative mobile payment options. With an estimated 13-million unbanked South Africans, the potential for such products is immense.

The downside of the trend, noted Myburgh, was that more citizens would be susceptible to cybercrime.

“There has never been a greater need for security and control in the banking environment, specifically on the digital highway,” said Myburgh. “This is not only because of the rise in internet banking fraud, but because the banks have a duty to commit to the Code of Banking Practice, which calls for safe, secure and reliable banking and payment systems.”

Myburgh added that “Security means more than identifying the risks and sanctioning the fraudsters. Solutions must be tailored to specific sectors and operations, and they must keep pace with the growing sophistication of attacks on banking systems.”

The Ombudsman, Clive Pillay, said the year 2012 saw a marked rise in the number of cases for the OBS. It opened files on 4 450 complaints, an increase of more than 800 over 2011. Of these, 2 387 cases were found in favour of the bank, reducing the number of cases in favour of complainants from 47% in the previous year to 42% for the year in review. This was attributed to an increase in the number of cases judged to result from debt-stressed consumers requesting relief from their banks in the form of extended repayment terms or reduced interest rates, rather than instances of bank maladministration.

ATM-related complaints were the most predominant, with more than 2 000 being investigated. Second were internet banking complaints, with a total of 1 160 files opened.

Only 22 cases were escalated to mediation or provisional recommendation stages, reflecting the OBS’s ongoing commitment to fair and impartial decision making.

The Ombudsman further stated that: “During the year, we continued to resist the temptation to take on the mantle of either consumer champion or bank defender, and we believe we have achieved this.”

“Our primary function is to resolve banking disputes, but we pride ourselves on using customers’ experiences to identify and rectify systemic defects in the delivery of banking services.”

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