The study also focused on identifying the socio-economic risks of mobile money transfer. In order to identify such risk the study inquired from the respondents who were the bank staffs through interview and questionnaire.
4.3.1 Money Laundering
The study intended to identify the effect of money laundering in banking sector by inquiring from the respondent on their view taking into consideration the involvement of the bank in mobile money transfer services.
Table 4.1 Showing Summary of the Responses on Identified Social Economic Risks of Mobile Money Transfer
Social Economic Risk Number of Respondents Percentage
Money Laundering 79 87.8% Fraud 76 84.4% Terrorism Financing 43 47.7% Operation Risk 87 96.6% Reputation Risk 72 80.0% Technological Risk 85 94.44%
Source: Field Data
Table 4.1: Findings Indicating Money Laundering Effect On Bank When Offering Mobile Money Transfer Services
Money Laundering Affect Bank
Number of Respondents Percentage
Yes 79 87.8%
No 11 12.2%
Not Sure 0 0.0%
Total 90 100%
Source: Field Data
The findings from the table suggest that, commercial banks encounters money laundering risk when offering mobile money transfer services. About 79(87.8%) respondents supported the inquiry as opposed to 11(12.2%) responses as further suggested by (FATF/OECD 2010). The risk is observed to affect banking operations owing to bank’s interaction with financial system. The predicament of such a risk has an impact to the financial system whose proper functioning is key facilitator to bank survival. The traditional banking system encountered the risk, however with the new sophisticated money transfer system the risk magnitude is even greater provided that concrete measure are not exercised.
4.3.2 Fraud
The study thought to investigate if fraud can affect bank when offering mobile money transfer services by the use of questionnaire and interview administered to the respondents. In light of study objective, fraud being one of the identified risks, respondents was inquired to provide their views sighting banks position on mobile money transfer services.
Table 4. 2: Finding Indicating Fraud Effects on the Bank When Offering Mobile Money Transfer Services
Money Laundering Affect Bank
Number of Respondents Percentage
Yes 76 84.4%
No 14 15.6%
Not Sure 0 0%
Total 90 100%
Source: Field Data
The study finding established that, bank can be hit by fraud via mobile money transfer services. There were 90 respondents out of which 84.4% agreed that fraud effects bank compared to 15.6% who commented that fraud does not affect the bank. The findings were in support with the bank’s finance manager views when inquired on fraud risk saying that:
‘Fraud incidences are occasionally experienced by commercial banks when operating financial transactions. There are incidences that the bank managed to prevent and others that affected bank directly. The bank is in a position to face more challenge from mobile money transfer service due to technological infrastructures involved. However prudent risk measure is in place to mitigate the risk’. Finance
Manager 21stAugust 2013.
The presence of prudent measures to mitigate fraud risk is dependent on bank staffs integrity as the key driver to ensure that the measures are functional. The level of ethics remains the point of focus provided that some of the staffs may engage in dirty activities that may perpetuate fraudulent activities.
4.3.3 Terrorism Financing
Terrorism financing activities is a worldwide problem that has attracted international attention. This study thought to identify the effect of terrorism financing to bank when offering mobile money transfer services.
Table 4. 3: Finding Indicating Terrorism Financing Effects on Bank When Offering Mobile Money Transfer Services
Terrorism Financing Affect Bank
Number Of Respondents Percentage
Yes 43 47.7%
No 47 52.3%
Not Sure 0 0%
Total 90 100%
Source: Field Data
The findings of the study suggest that most of the respondents forming 52.3% were of the view that terrorism financing does not affect the bank when offering mobile money services. However, looking at the number of respondents who supported the inquiry forming 47.7% of the respondents, the risk may affect the bank through indirect support of the activities via mobile banking infrastructure, the act that may
cost society and bank at large. Terrorism financing risk might seen to be new term in risk atmosphere, however there has been some few cases reported in Tanzania that has linkage to terrorism including killing of padre in Zanzibar Ireland.
4.3.4 Operational Risk
Operations risk is the risk that has been in existence in traditional banking. This study intended to investigate the possibility of the bank encountering the risk from the availability of mobile money transfer services in banks product line.
Table 4. 4: Finding Indicating Operation Risk Effects On Bank when Offering Mobile Money Transfer Services
Terrorism Financing Affect Bank Number of Respondents Percentage Yes 87 96.6% No 3 3.4% Not sure 0 0% Total 90 100%
Source: Field Data
Findings of the study showed that 87 respondents out of 90 who accounts for 96.6% observed that operation risk can affect bank when offering mobile money transfer services, owing to human errors that may occur in day to day bank operations. This may also happen due to staff negligence that may lead to skipping some of the bank procedures. This risk is crosscutting in nature; it can be noted in other areas as far as banks’ business scope is concerned. Operation risk may take place in other banks products such as loan and advances as further explained by the Central bank of Bahamas.
4.3.5 Reputational Risk
The study intended to establish the possibility of the bank facing Reputation risk when offering mobile money transfer services. Despite of bank encounters the risk in other service delivery for example telegraphic transfers, mobile money transfer can as well pose a threat to the bank. This study inquired from the respondents and the findings are as shown in the following table.
Table 4. 5: Finding Indicating Reputation Risk Effects on Bank When Offering Mobile Money Transfer Services
Terrorism Financing Affect Bank
Number of Respondents Percentage
Yes 72 80.0%
No 18 20.0%
Not sure 0 0.0%
Total 90 100%
Source: Field Data
The finding of the study established that most of the respondents were of the opinion that, reputation risk can affect bank when offering mobile money services, this accounts for 80% of the sample taken. Banks’ reputation can be easily damaged in a way customer can lose trust on the efficiency of the bank. If not well managed the situation may cause total negative image to the public. This opinion is supported by the responses of the bank’s operations manager when inquired to provide her views on effect of reputation risk to the bank when offering mobile money transfer services;
Reputation risk effect can take various forms from drop in banks performance to possible bank run. A negative public image spreads fast than the positive
information. Mobile money transfer services if not well managed for instance time to time system failures, banks failure to protect customers money may send negative signals that may force out customers and thus drop in banks performance. Operations manager 21stAugust 2013
Negative public opinion can have negative effect to bank operation; they normally happen out of loss of trust due to unauthorized activity on customer account, disclosure or theft of confidential customer information to unauthorized parties and failure to provide desirable services.
4.3.6 Technological Risk
This study intended to identify if technological risk affect bank when offering mobile money transfer services by inquiring from the respondents on their views taking into consideration the type of technology involved in this type of service delivery.
Table 4.6: Finding Indicating Technological Risk Effects on Bank When Offering Mobile Money Transfer Services
Terrorism Financing Affect Bank
Number of Respondents Percentage
Yes 85 94.44%
No 3 3.33%
Not sure 2 2.22%
Total 90 100%
Source: Field Data
The study found that 85 respondents who account for 94.44% were of the view that technological risk affects bank when offering mobile money transfer services. Its
only 3.33% who had different opinion. The inquiry is further explained by the IT manager that;
Mobile money transfer services encounters technological risk due to percentage dependencies on external network efficiency mainly from mobile service providers such as Vodacom Tanzania. This has negative impact due to possible disruption of services that may lead to inefficiencies when provider’s network fails. There is also danger of users (mobile phone operators) exposing their passwords due to cellular phone technology that does not hide characters as one type the password. This may lead to password accessibility by the unintended person. IT manager 21st August 2013.
As mentioned in the literature review, there are number of issues associated to technological risk, these includes irregularity arising from the use of computer hardware/software, system failure, processing error and network vulnerability. Mitigation of the risk is highly dependent on the accuracy of the technology and the strength of the service delivery chain.
Generally the study is centered on the extent to which social economic risks affects commercial banks when offering mobile money transfer services. The risks studied include money laundering, frauds, terrorism financing, technology risks, operation risks and reputation risks.
The study revealed that socio-economic risks may lead to adverse impacts economically and socially through loss of money and loss of reputation respectively.
However, the society either can be adversely affected through loss of lives from terrorism.
Generally the study found that the bank staffs encounters problems due to money laundering and terrorism risk. This is because bank staffs had little knowledge on custody information to handle possible risk problem occurs. The reasons underlying inefficiencies to handle possible problem is that mobile money transfer activities involve non bank customers who are non account holder, their movement in and out the bank may have different intentions such as robbery, and theft.