A System at Breaking Point

Digital financial services have unlocked extraordinary gains in access and inclusion, particularly across emerging markets. In Nigeria, for instance, over 60 million adults now use mobile-enabled accounts. But as mobile-first adoption accelerates, the same infrastructure that drives empowerment is also being exploited by fraudsters operating at a frightening scale, speed and sophistication.

According to data from the Central Bank of Nigeria, digital fraud incidents increased by 45% year-on-year. Digital channels now account for approximately 70% of reported losses, with mobile and POS-related scams alone costing Nigerians over ₦42 billion in Q2 2024. 

These figures show that this is no longer just a matter of rising fraud statistics or a consumer protection concern. It represents a systemic crisis, fuelled by fragmented accountability, outdated assumptions, and consumer protection models unfit for today’s digital environment. 

Despite robust policies in theory, over 90% of fraud victims are never reimbursed. Trust is eroding. And without trust, the promise of digital finance cannot hold.

The Problem with Zero-Liability

Much of today’s misalignment stems from the widespread reliance on zero-liability regimes. These frameworks aim to shield consumers from financial loss, regardless of the source or nature of the fraud. Although politically and reputationally attractive, they are built on a flawed assumption: that consumers are clueless, passive participants, and that protection must come exclusively from financial institutions.

This is not to deny the asymmetry of power between fraudsters and everyday users. Many consumers lack the tools, literacy, or digital resilience to defend against targeted scams. But acknowledging this vulnerability does not require enshrining helplessness. Rather, it calls for a system that recognises the consumer as one surface of risk and a potential line of defence when appropriately equipped.

Zero-liability has played a vital role in driving adoption and trust, and made sense in earlier eras before the wholesale digital transformation in financial services. Today, it limits the system’s ability to evolve in response to increasingly complex, multi-actor fraud threats.

The consequences of this approach are serious:

1. Distorted incentives. Consumers may become less vigilant. While many providers have invested in fraud detection, transaction monitoring and customer authentication, these efforts remain siloed and reactive. When redress is treated as a compliance ritual rather than a meaningful remedy, there’s little incentive to embrace smarter, shared protection — especially against fraud that cuts across telcos, cloud platforms, apps, and consumer devices.
2. Unfair burden. Banks and fintechs absorb losses, even when the fraud originated from factors outside their visibility or control.
3. Exploitable gaps. Fraudsters thrive in the handoff zones between actors, such as telcos, payment aggregators, and app platforms, where accountability is vague or non-existent. For example, a scam initiated on social media but executed via payment apps can bypass clear liability entirely.

As transactions increasingly span consumers, telcos, fintechs, banks and cloud infrastructure, the idea that responsibility can rest with just one party no longer makes sense.

What the System Gets Wrong

Deeper diagnosis reveals five recurring failures in the current model:

•       Narrative distortion. Consumers are framed as helpless victims, instead of active participants in prevention with the potential to become the first line of defence.
•       Consumer-side exposure. Most fraud originates from consumer-side vulnerabilities, yet financial institutions often bear the cost.
•       Policy-practice disconnect. Rules may appear strong on paper, but enforcement is not scalable and redress outcomes are poor. In Nigeria, redress cases regularly exceed 30 days, with fewer than 5% resulting in full and timely restitution.
•       Misaligned incentives. Protection is offered, but in ways that do not elevate vigilance and responsibility. Meanwhile, providers lack strong motivation to seek innovative collaborations.
•       Unmet consumer needs. Consumers still ask the same questions which remain unanswered: Will I get my money back when fraud happens? How fast? How easy is the process? How can I reduce the likelihood of becoming a victim?

These issues cannot be resolved through patchwork reform. A structural rethink is required. It must reflect the actual complexity of modern digital finance.

An Alternative: Tiered Shared Liability

A viable path forward is a framework that blends the fairness of proportional responsibility with the nuance of contextual risk analysis. This is the logic behind the Tiered Shared Liability Framework.

It is built on three foundational ideas:

1. All accounts are not equally valued. Different consumers attach different values to their bank accounts and rightly so. They should be given the option to determine the level of fraud protection they want on their account.
2. Fraud is not uniform. Different types of fraud, such as unauthorised access, phishing or social engineering, carry different risk profiles and occur at different control points.
3. Responsibility should match control. Liability must reflect who had the ability to prevent the breach or detect it in time.

For example, a SIM swap exploit that compromises a user’s account should not result in sole liability for the bank. Similarly, an institution should not penalise the customer for failing to spot a sophisticated social engineering scam deployed via spoofed interfaces.

This model does not eliminate institutional responsibility. Instead, it introduces a fairer distribution of risk and redress obligations. Each actor in the chain, whether consumer, financial provider, or third-party enabler is held accountable in proportion to their role, visibility and capacity to act.

In doing so, it restores incentives to invest in prevention, encourages cross-actor collaboration, and ensures that no single party carries the full weight of systemic failure. Assigning proportional responsibility is not without difficulty. Visibility and control are not always easy to map. But the alternative — singular liability for a distributed failure — is no longer defensible.

The Missing Link: Embedded Insurance and Proactive Protection

Even the best-designed liability frameworks will leave behind a layer of residual risk. These are the edge cases; fast-moving, unpredictable fraud events that escape early detection or occur across opaque handoffs. This is the space where traditional models stall and victims often fall through the cracks.

To close this final gap, we need more than regulation. What is required is an insurance-backed model that combines:

•       Embedded, intelligent prevention. Real-time fraud detection using behavioural analytics, device signals and anomaly tracking, integrated into the transaction flow.
•       Embedded residual risk cover. Seamless insurance that guarantees reimbursement when losses occur, without complex adjudication or blame assignment.

This is not a call to outsource accountability to insurers. It is a recognition that no prevention system is perfect. Embedded protection acts as a stabiliser. It covers the unpredictable tail risk that even the best-aligned liability frameworks cannot always resolve.

This model gives consumers certainty that redress is guaranteed and timely. It also offers providers operational clarity, enabling them to absorb losses in ways that are actuarially sound and reputationally sustainable.

More importantly, it shifts the system from reactive to proactive. Instead of waiting for fraud to happen, this approach anticipates, mitigates, and, when necessary, compensates. It removes the false choice between consumer protection and institutional liability.

Finally, the consumers’ unanswered questions can be laid to rest—not through promises, but through embedded system design.

Conclusion: Completing the Trust Stack

The Tiered Shared Liability Framework provides a solid foundation for a fairer, more defensible approach to fraud redress. But only an insurance-backed, prevention-first model can complete the picture.

Together, they form a complete risk stack:

• Smart categorisation of fraud
• Fair and proportionate responsibility
• Embedded tools to detect and prevent
• Guaranteed recovery when all else fails

This is how we build trust back into the system, not just through policy, but through design.

Trust is not a feature of digital finance. It is its operating system. Only a shared, intelligent approach to risk can keep it running.