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Chris Akolo: Why online fraud is high during festive seasons and how to prevent it


Kenyan consumers have expressed a strong desire to buy more discretionary products during the festive season while coming out of the pandemic.

However, Christmas and New Year’s Eve holidays for many online businesses are not only a pleasant time that you can spend summing up your achievements of the year, planning your long-term prospects, and making gifts to your employees, clients, and loved ones.

Unfortunately, at the end of December online fraud reaches its peak. Online businesses have to keep a subtle balance in order to provide their customers with the opportunity to use financial products online via web and mobile applications and at the same time take efficient risk prevention measures.

The amount of online-fraud attacks usually rise dramatically before the holidays along with the consumers’ need for shopping and, as a result, the need for additional credit means. However, we are witnessing the largest growth of online fraud just before the Christmas holidays. In the month of December compared to November 2022, online fraud has been steadily on the rise with fintech suffering from the attacks by more than 20%. According to JuicyScore experience, in this season, the number of applications grows at least 2.5-3 times.

In 2021, the Kenya National Bureau of Statics reported that data breaches like data extortion, data leakage, and data disclosure constituted almost 71 percent of the cyber-attacks for local businesses. The main risk that the owners of e-commerce and fintech companies usually face during this period is a sharp increase of fraudulent applications in the application flow. How exactly does this happen? The fraudster repeatedly submits applications for a loan to different financial institutions, changing some pieces of the data from an application to application in order to “slip” through the lender’s decision-making systems.

The most difficult case in terms of consequences for online business – is when a fraudster uses compromised data obtained illegally, the so-called identity theft, which is a rather common fraud type in Kenya. Such issued loans/credit lines become really unpleasant surprises for both – the owner of stolen credentials and the credit institution. Such a loan subsequently turns into a financial loss and damage to the company’s reputation.

We know that seasonal attacks bring a lot of trouble due to the growing percentage of the black sheep”: according to our data, normally each 10th application would be fraudulent, but during a festive season rush these figures can be up 10 times higher. However, following our to-do list will help you to reduce risk rather than deal with its consequences and keep your business operations safe. Dealing with the “fly in the ointment” is most often quite easy:

  •  Apply a more conservative approach: one of the most frequently used methods is to temporarily tighten the company’s risk policy in the context of the approval of applications. Evaluation of new loan applications in a more conservative manner and rigorous selection will help protect businesses from potential financial losses;
  •  Pay great attention to the applications with high-risk markers – attempts of device or internet connection manipulation as well as the users shady behavior. This will help to reduce the share of borrowers who try to apply for a large number of loans and credits often manipulating application data at the same time (for example, using data of relatives, the so-called family fraud).
  •  Approach the valuation of frequency characteristics in a more conservative way. But of course, in this case, the company runs the risk of losing profit. This problem may be solved by a more precise adjustment of the financial product for the end user. Having developed special offers, and considering the needs of customers, the company can mitigate the situation.

Chris Akolo is the Regional Business Development Director at JuicyScore.

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