Has M-PESA Led to Half of All Kenyans Suffering SIM Swap Fraud?

A recent article from Rest of World suggests Kenya’s mobile money revolution is now out of control.

M-Pesa has been huge for Kenya’s economy — and for scammers

Nearly half of the country that uses the ubiquitous mobile money service has fallen victim to fraud

The story is worth picking apart because it neatly illustrates how exaggerated fraud statistics get recycled but accurate fraud statistics are ignored. Rest of World describes itself as reporting global tech stories from a non-Western perspective. However, my suspicions were aroused right at the beginning of the article, not just because the claim in the article’s lede sounded implausible but also because the piece opens with the story of one victim whose mobile money wallet was raided in January 2022. If there is a 50-50 probability that any Kenyan will have suffered the same fraud, why recount one particular crime from over a year ago? The likely explanation is that the writer wanted an example that fitted his narrative for the whole country. It was convenient because of this small snippet of court testimony.

In court, Mwanzo also pointed a finger at Safaricom, his cellphone provider. He said he couldn’t understand how his SIM card had been so easily replaced and his accounts accessed remotely. “Safaricom ought to take responsibility. There are many complaints of SIM swap,” Mwanzo said.

That paragraph contained another hint at the writer’s bias. Kenyans use mobile phones, not cellphones. They also use mobile money, whilst nobody has ever used cell money or C-PESA. Americans are entitled to doggedly stick to their own unique terminology if they prefer, but they cannot make the rest of the world conform, just as they will never persuade the planet that baseball’s World Series is an international sporting competition like football’s World Cup. The writer of this particular article, Martin Siele, says he is based in Nairobi, but it is apparent that he is writing with an American audience in mind. If he wants to educate Americans about other countries, it would help if he presented them with reliable information.

M-Pesa’s ubiquity has attracted many scammers. In 2021, a FinAccess survey found that nearly half of the Kenyans using mobile money had fallen victim to fraud or accidentally transferred money to the wrong recipients.

Perhaps Siele can argue he did not write the lede for his own article, though we should all be conscious of the difference between “half of the country” and “half of the Kenyans using mobile money”. Estimates of Kenya’s population vary because of its rapid growth, but the 2019 census reported a population of 47.6 million whilst the World Bank’s 2021 estimate was 53 million. There were 74 million registered mobile money accounts in February 2023 according to statistics from the Central Bank of Kenya, which would mean there is well over one mobile money account per person. This must significantly increase the chances of a person suffering fraud because they have multiple accounts which can be hijacked, with some of those accounts likely to be neglected by customers and thus more easily commandeered by criminals without anyone noticing. In October 2022, Safaricom CEO Peter Ndegwa indicated that the number of active M-PESA users in Kenya was 32 million, a rise of 2 million since the financial report for the year ending March 2022. M-PESA dominates the mobile money market in Kenya, with nearly 100 percent market share. Whichever way you cut these numbers, “half of the Kenyans using mobile money” has a very different meaning to “half of the country”, although it is a lot of people.

But what makes Siele’s claims egregious is that he wrote an article that is exclusively about Kenyans suffering fraud but which relies on the word ‘or’ in an assertion that nearly half of Kenyans had fallen victim to fraud or had accidentally transferred money to the wrong recipients. The statistic is taken from a report issued by the Central Bank of Kenya in December 2021. Per the report:

Respondents who reported to experienced [sic] of loss of money increased in 2021 compared to 2019. Mobile money account users who reported loss of money was 47.4 percent in 2021 compared to 8.4 percent reported in 2019. This may partly be due to increased use of mobile money during the period.

47.4 percent is nearly half of users, but that does not mean nearly half of users suffered fraud.

Among mobile money users reported to have faced the risk of losing money, 71.4 percent indicated sending money to wrong number as the key. Other challenges included; hoax phone calls or SMSs, and cybercrime and frauds on bank accounts and mobile bank accounts.

Nobody wants people to lose money because of a mistake they made whilst transferring money, but making a mistake is not the same as falling victim to fraud. Based on these figures, fewer than 14 percent of active mobile money users in Kenya have been hit by a mobile money fraud. This comes before making any adjustments for the likelihood that respondents to this kind of survey will typically over-report crime because people who do not suffer crime will be less motivated to participate.

A single crime is one too many, and we should not downplay the significance of SIM swap fraud and other frauds targeting mobile money users. Safaricom is facing a class action lawsuit from victims of SIM swap crimes who argue it is too easy for criminals to hijack accounts and then use the overdraft facility to rack up debts in somebody else’s name. But wildly exaggerating the extent of crime is not helpful either. Mobile money has been a glorious success story for Kenyans, which is why they like to use it. Any new system which has grown in popularity as quickly as M-PESA will attract the attention of criminals. Siele has gone out of his way to talk down Safaricom by cherrypicking the information he presents. For example, he observes that Safaricom has a problem with insiders committing crime.

Some of the M-Pesa scams have come from within Safaricom. In the financial year ending March 2022, the company sacked 24 employees for fraud, with 10 fired in connection with SIM swap cases.

What Siele fails to note is that 24 is fewer than the 28 employees fired for fraud-related offenses in the previous financial year. It is a lot less than the 52 employees that were dismissed in the financial year ending March 2017, the first year that Safaricom started to report transparently about the steps it was taking to reduce internal fraud and the numbers of staff that consequently needed to be sacked. Contrary to Siele’s conclusions, this statistic suggests a downward trend for fraud.

Siele’s article punishes Safaricom by selectively using their commitment to transparency against them. He might instead have asked why big US telcos like AT&T never report the number of insider fraudsters they have had to fire over the years, even though notorious fraudsters have publicly bragged that a bribe of USD200 is sufficient to persuade many US telco employees to commit SIM swaps.

Rest of World says they offer an alternative to “the Western-centric worldview that leaves an unthinkable number of insights, opportunities, and nuances out of the global conversation”. Perhaps they really believe that is what they provide. But if they wanted to offer insight and nuance they could at least have done some basic fact-checking before publishing a deeply flawed piece about mobile money fraud in Kenya. I expect the publishers care passionately about racism, but this article indulged one of the worst racist tropes. Instead of celebrating inventiveness and rising prosperity, they reiterated the racist cliché that everyone should pity black communities because they remain especially prone to crime.

Kenyan business consultant Joseph Nderitu will appear on today’s episode of The Communications Risk Show, which will discuss the regulatory dividing line between telcos and banks, and how telcos should manage the risks that come with supplying financial services to their customers. These themes will be examined in the particular context of two major lawsuits concerning M-PESA. Joseph has advised some of Africa’s leading telcos on how to manage their mobile money services, and he was one of the first people to assure mobile money services when he was employed by Safaricom. Tune in live at 10am US Central, 4pm UK and 6pm Kenyan time to put your questions to Joseph through our messaging system at tv.commsrisk.com, or if you miss the live show then catch up with the video recording or audio podcast soon after the broadcast has finished.

Eric Priezkalns
Eric Priezkalns
Eric is the Editor of Commsrisk. Look here for more about the history of Commsrisk and the role played by Eric.

Eric is also the Chief Executive of the Risk & Assurance Group (RAG), a global association of professionals working in risk management and business assurance for communications providers.

Previously Eric was Director of Risk Management for Qatar Telecom and he has worked with Cable & Wireless, T‑Mobile, Sky, Worldcom and other telcos. He was lead author of Revenue Assurance: Expert Opinions for Communications Providers, published by CRC Press. He is a qualified chartered accountant, with degrees in information systems, and in mathematics and philosophy.