Bank Customers Overdraw $7.7 Million Following System Glitches Caused by Migration

• A Kenyan bank has lost about $7.7 million due to system glitches during a migration
• During a critical system upgrade, customers withdrew $7.7 million, or about N12.9 billion, from October 11 to 31, 2024
• The bank reportedly restricted accounts for customers who overdrew their balances and notified them of the development

Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment and the economy for over a decade.

Technical glitches during a critical data migration enabled customers at Kenya’s biggest bank, the KCB Group, to withdraw sums above their bank balances.

During a critical system upgrade, customers withdrew $7.7 million, or about N12.9 billion, from October 11 to 31, 2024.

Bank restricts affected bank accounts

The bank reportedly restricted accounts for customers who overdrew their balances and notified them of the development.

Read also

CBN issues instructions to banks as FG’s 9-month amnesty for illegal dollar deposit kicks off

According to reports, the bank is also preparing to use loan recovery companies to go after the customers.

After migrating its database to a location centre, KCB attempted to integrate its cloud database, leading to a sync error.

The bank’s KCB-M-Pesa target savings accounts, which let people access short-term loans and save, were the worst hit, allowing customers to withdraw up to three times their saved amount.

KCB to use loan recovery companies

TechCabal reported that the glitches, which lasted three weeks, show a bank struggling to modernise its IT infrastructure.

According to the report, a high-priority notice to KCB staff during the crisis indicated that employees were sometimes unable to access the affected systems, leading to prolonged service interruption or total outage.

The bank has yet to comment on the glitches; however, top executives discussed addressing the issue at a crisis meeting and explored recovery options.

The Kenyan financial services sector is battling a growing fraud concern, with banks losing about 130 million annually.

Read also

Zenith Bank speaks on IT upgrade as CBN releases reporting channels for customers

Nigerian banks sack 84 employees due to fraud

Many Nigerian banks reported successfully migrating their core banking systems to new platforms to secure depositors’ funds and boost confidence in the bank sector.

Meanwhile, a breakdown of the reports on Fraud and Forgeries in Nigerian Banks by the Financial Institutions Training Centre (FITC) in the first half of this year showed that at least 105 bank employees were involved in fraud.

However, this figure was a 34.38% decrease from the 160 employees involved in fraud cases in 2024.

The amount lost to fraud cases rises

Despite the decline in staff involvement in fraud, the total amount lost to fraud cases rose by 380.13%, up from N12.33 billion between January and June 2023 to N59.2 billion in the same period this year.

The number of bank employees terminations due to fraud rose, with 84 employees dismissed in the first half of 2024, an increase of 223.08% from the 26 terminations recorded in the same period last year.

Read also

Fitch shares insight on naira performance against US dollar

However, outsider involvement in fraud cases declined slightly by 10.78%, with 21,335 cases reported in the first six months, a decline from 23,912 in 2023.

The top channels for fraud in banks

Data showed that outsider involvement in fraud cases stood at 92.74% of bank fraud cases between January and June this year.

The fraudsters employed different channels to perpetrate their activities. 

The three most prevalent channels for fraud in banks were via ATM, web, and fraud involving bank branches.

In the period under review, fraud via bank branches tops the list with a significant margin involving a total of N55.01 billion, representing 646.4% from N7.37 billion lost to fraud at bank branches in the same period in 2023.

The banks recorded web fraud of N1.87 billion, while ATM-relation fraud increased to N43.1 million in the review period.

4 Nigerian banks give notices of system upgrades

Legit.ng earlier reported that commercial banks’ tech upgrades in the past few weeks had caused severe customer concerns, panicking bank customers in rural areas.

Read also

Access Holdings reports increase in profit to N458 billion as it plans to open new offices

The situation is set to get worse as more banks announce that they will be upgrading their technology infrastructure in the coming weeks.

According to reports, Sterling Bank customers tasted the bitter pill of frustration after the bank began migrating its systems from T24 to SEABaaS, a new, locally-developed core banking application, causing disruptions that lasted for days.

Proofread by Kola Muhammed, journalist and copyeditor at Legit.ng

Source: Legit.ng