The Bank Verification Number (BVN) is the brainchild of banks and the NIBSS. Before its creation, Nigeria's banking industry had a shared problem. There was no way to adequately identify who was creating an account because there was no comprehensive identity database to work with.

Thankfully, with the BVN, banks can now capture and use their customers' biometric data for smooth and easy verification. It is now the unique customer ID for the banking industry. There are currently between 55 to 60 million BVNs in circulation.

Though the BVN was initially created to identify individuals in the banking sector, it has since been adopted by other financial and non-financial institutions to aid in identity verification. Today, the BVN is used in various sectors such as investment, insurance, pension, and civil service.

While the BVN is a crucial component of Nigeria's banking industry, fraudsters have also found ways to utilize it for cybercrime. 

This was the topic of our webinar titled "Fighting BVN and loan fraud." We held discussions with Ayomide Oso, co-founder of Dojah, Gbenga Omolokun, MD of VFD Microfinance Bank, and Razaq Ahmed, CEO of Cowrywise, to learn how individuals can protect their financial security and fight the pandemic of BVN and Loan fraud.

How Fraudsters Exploit the BVN

While the BVN is a crucial component of Nigeria's banking industry, fraudsters have also found ways to utilize it for cybercrime.

Gbenga shared some ways fraudsters get their hands on BVNs in the first place:

• BVN registration agents create "ghost BVNs," which are BVNs that don't have any biometric data attached to them. This means there is no way to trace who the BVNs belong to.
• Fraudsters prey on the ignorance of less privileged people in villages and IDP camps who don't know better. Most times, these disadvantaged people didn't have phone numbers, so the fraudsters would input their own phone numbers and start using the BVN for themselves.
• Fraudsters who get their hands on stolen or lost SIM cards dial the *565*0# USSD code to get the BVN attached to that phone number.

Having gotten access to legit BVNs, these bad actors could then use these IDs to access financial services while remaining anonymous. One of the most common types of fraud bad actors use BVNs to commit is loan fraud. With loan fraud, the fraudsters use the victim's identity to take loans and default on payments, leaving the victim to bear the financial responsibility of those loans.

Razaq recommends the following strategies fintech providers can use to prevent fraud:

• Ensure data privacy and the security of customer's data
• Understand the limitations that come with digital onboarding and address these limitations
• Explore KYC methods like liveness check to ensure the person being onboarded is a live and active user

From the user perspective, Gbenga provided the following fraud prevention strategies:

• Be careful of the application you share your BVN and personal details with
• There are legitimate and illegitimate businesses out there. Do your research and know who you're dealing with
• Call your financial institution directly to confirm any strange and urgent requests you receive

Conclusion

As a final part of the webinar, we ran a poll asking the attendees if they or someone they knew had ever fallen victim to BVN or loan fraud. Shockingly, 58% of the attendees responded with "yes." This alarming statistic highlights the importance of securing one's finances.

Watch the recording to get all the details from the BVN and Loan Fraud webinar.