Flutterwave, a Nigerian fintech startup, received a court order on February 1 to initiate the recovery process for ₦19 billion ($24 million) lost through unauthorised transactions by point of sale (PoS) merchants on its platform.
The fintech company plans to reach out to more than 6,000 account holders across 35 banks and financial institutions to recover the funds.
The issue arose when Flutterwave discovered on October 10, 2023, that certain PoS device merchants had misused their access to its platform due to a technical glitch.
As a response, Flutterwave temporarily suspended accounts where illegal transfers occurred.
Flutterwave asserts that no customer funds were lost and assures the public that it’s actively cooperating with authorities to investigate and resolve the matter.
The recent court order compels 35 financial institutions, including major banks and digital operators, to share the contact information of the account holders. Flutterwave will utilise email, SMS, and WhatsApp to reach them.
The success of this recovery hinges on the accuracy of customer information provided by banks, emphasising the importance of Know Your Customer (KYC) regulations. However, experts highlight gaps in the current KYC measures, particularly the lack of requirement for customers to update their information.
This situation occurs amidst a rise in fraud attempts in Nigeria’s financial sector. Some traditional banks are considering blocking neobanks due to concerns over their anti-fraud and customer verification standards.
Fidelity Bank, for instance, temporarily restricted transfers to digital financial institutions in October 2023.
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