Interswitch, an African payments and infrastructure company, reportedly incurred significant losses amounting to approximately N30 billion due to a system malfunction that enabled certain merchants to illegitimately request and receive chargebacks. In this context, a chargeback is when a customer successfully disputes a transaction on their account statement or transaction report, resulting in a reimbursement to their payment card, which can be a debit or credit card. Chargebacks can be authorized for various reasons based on the cardholder’s claim.
In an effort to recoup the lost funds, the company is currently pursuing a legal course of action and has also informed the Economic and Financial Crimes Commission (EFCC), which is Nigeria’s agency responsible for combating money laundering. As per an individual familiar with the situation, Interswitch has managed to recover slightly more than N10 billion at this point. Interswitch, when approached for comment, chose not to provide a statement.
According to court documents reviewed by TechCabal and confirmed by three individuals with direct knowledge of the situation, Interswitch has taken legal action by filing a motion in court regarding suspicious bank accounts. The company, a major player in the payments industry, has also requested that 54 banks impose restrictions on numerous suspected bank accounts until the investigation and recovery process is concluded. This information was shared by a lawyer from a leading Nigerian law firm who is familiar with the ongoing case.
The chargeback fraud dates back several years, as stated by two sources who are aware of the situation, but they chose not to provide a specific timeline. However, the recent incident is believed to be directly related to a group of former and current Interswitch employees who may have taken advantage of vulnerabilities in the company’s system, according to these sources. Additionally, one individual has reportedly been arrested in connection with the incident.
Over the past four years, Nigeria’s financial services industry has experienced an increase in fraud-related incidents. According to the Financial Institutions Training Centre (FITC), Nigerian financial institutions have reported losses amounting to N159 billion ($201.5 million) due to fraud cases since 2020.