Internet banking tops Ombud’s complaint list for first time

For the first time in its 18-year existence, the Ombud for Banking Services has received more internet banking than ATM complaints.

The trend is indicative of a move towards technology in the banking sector and that more transactions are performed using this platform, Reana Steyn, the Ombud for Banking Services, says.

It comes at a time when a growing number of digital banks plan to enter the local banking landscape, with Bank Zero and TymeDigital expected to come to market later in 2018. Discovery also plans to enter the retail banking space, but hasn’t officially confirmed to what extent it would rely on a digital-only model.

The Ombud received 1 377 internet banking and 1 115 ATM complaints in 2017, compared to 940 and 1 382 respectively in 2016, its preliminary figures show.

While internet banking complaints typically involve phishing, there has been a marked increase in the number of complaints related to fraud initiated via SMS, Steyn says.

SMS phishing (SMiShing) is a practice where fraudsters send out high volumes of SMSes to banking customers and inform them that they are entitled to a reward, points or compensation. Thinking that it is a legitimate SMS from their bank, consumers phone the fraudster and supply the password and PIN for their online banking profile, which the impostor uses to steal money from their account.

In classic phishing cases, the fraudster follows a similar method, but approaches the consumer through an email hoping to obtain his banking information through a bogus banking website.

There has been “quite an increase” in SMS phishing complaints, Steyn says.

When it receives a complaint, her office will investigate if there was maladministration on the part of the bank, if the consumer did something to compromise her details, if the bank’s systems malfunctioned, whether there was anything problematic in the contract, or whether the consumer provided the fraudster with his banking details to enable him to transact. Unfortunately, there is no way for the bank to know that it is not the consumer transacting if the fraudster logs in with the client’s own password and pin, she says.

Steyn says although there are consumers who realise they’ve made a mistake and admit it, many are aggrieved about the situation and feel that their losses must be a result of internal bank fraud, as they would never disclose their password and pin. However, in some cases, this could be related to an e-mail they clicked on months before without realising it.

With regards to internet banking, the Ombud found in favour of the complainant in 23% of cases in 2017. It found in favour of consumers in 27% of the overall cases it investigated. Although the number seems low, it may in part be explained by the fact that complainants may only approach the office once they have exhausted the banks’ internal complaints procedures.

Most complaints with merit are typically resolved by the bank at an earlier stage, Steyn says.

Overall, around 7 000 total cases were opened at the Ombud’s office in 2017, an increase of 35% compared to 2016. Roughly 6 500 cases were closed, a year-on-year increase of 25%.

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