Have you ever hesitated when confronted with a text message reminding you to pay an unpaid bill? Or received a message claiming to be from your bank, urging you to update your personal information? Looking at the case of Kenya, economists Elif Kubilay, Eva Raiber, Lisa Spantig, Jana Cahlíková, and Lucy Kaaria examined the ability of individuals to detect fraud attempts.
According to a 2017 report by the International Telecoms Week Global Leaders' Forum, which brings together the world's leading operators, phone scams cost the telecom industry $17 billion annually. While global data on individual losses is unavailable, a study by Truecaller, a company specialising in call-filtering apps, estimates that Americans lost €29.8 billion to such scams in 2021.
Despite the efforts of operators to establish detection and prevention teams and the increasing awareness of these risks among individuals, this menace persists. Nothing seems to work to eradicate it entirely. The team of economists took a closer look at the effectiveness of scam awareness and how well people could identify SMS fraud attempts, with their research focusing on Kenya.
In Kenya, mobile is king
- 1
Tavneet S., William J., 2016. « The long-run poverty and gender impacts of mobile money » Science 354 (6317), 1288-1292.
©IMF CC BY NC ND, Toi Market Naroibi Kenya
One notable characteristic of Kenyan society is the relatively low presence of smartphones. According to statistics from the Communications Authority (CA), Kenya had 30.8 million active smartphones by the end of 2023, representing a penetration rate of 60.9% among the 62.9 million mobile phones connected to the network. Basic "feature phones," which provide limited access to the internet, account for 63.5% of all mobile devices.
However, this digital prosperity conceals a troubling reality: phone scams. A survey of digital financial services users in the country found that 56% of respondents had been contacted by scammers within the past six months, predominantly via phone calls. This form of fraud poses a significant consumer protection challenge in Kenya. It not only impacts victims' finances but also their mental health, often leading to stress, depression2, and a broader erosion of trust in financial services3. Victims frequently feel shame or guilt, which discourages them from reporting scams, causing the authorities to underestimate the true scale of the problem.
- 2
DeLiema M., Deevy M., Lusardi A., Mitchell O., 2020. « Financial fraud among older Americans: evidence and implications ». J. Gerontol. Ser. B Psychol. Sci. Soc. Sci. 75 (4), 861–868.
- 3
Gurun U. G., Stoffman N., Yonker S. E., 2017. «Trust busting : The effect of fraud on investor behavior ». Rev. Financ. Stud. 31 (4), 1341 – 1376.
Distinguishing truth from falsehood
Participants were presented with either scam messages or official messages from financial operators and asked to determine whether the message was fraudulent. They were also asked to assess their confidence in their responses. Half of the participants received tips on recognising scams beforehand. These tips, commonly shared by mobile phone providers and banks as part of awareness campaigns, included advice such as being cautious with unknown numbers, looking out for spelling errors, and remembering that banks will never request your PIN or password.
- 4
Chen Y., YeckehZaare I., Zhang A.F., 2018.« Real or bogus: predicting susceptibility to phishing with economic experiments». Plos One 13 (6), e0198213; Burke J., Kieffer C., Mottola G., Perez-Arce F., 2022. « Can educational interventions reduce susceptibility to financial fraud?». J. Econ. Behav. Organ. 198, 250–266.
©IMF CC BY-NC-ND, Naroibi Kenya
Ultimately, 71% of the messages were correctly identified by participants. Interestingly, receiving advice did not improve their ability to detect fraud. Participants were more likely to correctly identify fraudulent messages but less likely to identify genuine ones. The researchers attribute this phenomenon to a tendency toward "overcaution": fear of falling victim to scams led many participants to classify genuine messages as fraudulent. This cautious approach may also stem from the fact that legitimate messages often share characteristics typically associated with scams—such as typos, grammatical errors, unknown senders, and shortened links—making them harder to distinguish.
The effectiveness of practical advice in detecting fraud also depends on factors such as education and user experience. A higher level of education and frequent use of digital financial services are linked to a greater ability to identify scams. Familiarity with various online financial services and transactions enhances vigilance, reducing the likelihood of falling for scammers’ tricks.
So, what can be done?
The study raises questions about the effectiveness of traditional fraud awareness and prevention campaigns. To better protect potential victims, the researchers suggest adopting a more nuanced approach. This includes targeted communication tailored to specific groups, regular updates about the latest fraud tactics, and experimenting with innovative prevention strategies to outpace evolving scams.
©IMF CC BY-NC-ND, Naroibi Kenya
As scammers become increasingly clever at circumventing the safeguards put in place by telecom operators and authorities, staying informed about the latest fraud techniques remains a valuable defense. For instance, the website Numerama offers a comprehensive overview of common scams and tips for identifying them. Technological solutions, such as two-factor authentication —particularly on smartphones—can also provide added protection. In Kenya, the government is focusing on the local production of affordable smartphones. Notably, Safaricom has announced the launch of an assembly plant expected to produce over one million smartphones annually.
In the face of ever-more inventive scammers, effective prevention strategies must be grounded in a thorough understanding of user behaviour, to ensure that prevention efforts are both relevant and impactful.
