KCB Group Faces $7.7 Million Overdraft Crisis Following Data Migration Glitch

During a major data migration process at Kenya’s KCB Group, a technical glitch allowed customers to withdraw amounts far exceeding their account balances. According to sources familiar with the matter, between October 11 and 31, customers collectively overdrew roughly $7.7 million (KES 1 billion).

How It Happened

The glitch, which occurred as KCB migrated its data systems from an on-premise setup to a colocation data center, caused a synchronization error that led to backend misalignments. This prevented real-time account balance updates. As a result, certain accounts could be accessed repeatedly for withdrawals without reflecting the actual remaining balance.

KCB has since made moves to restrict the affected accounts and notify the customers involved. To recover the overdrafted funds, the bank is also reportedly considering deploying loan recovery agencies.

KCB-M-Pesa Hardest Hit

One major area affected by the glitch was the KCB-M-Pesa target savings accounts, which are particularly popular due to their flexibility in offering short-term loans and easy withdrawals.Customers were able to gain unintended access to amounts up to three times their saved funds. In an internal memo to staff, KCB acknowledged ongoing issues with access to certain systems, causing sporadic service interruptions and even full outages over the three-week period.

At a crisis meeting on October 12, KCB executives came up with potential responses, including freezing overdrafted accounts and organizing additional meetings to strategize on fund recovery. The bank has thus far remained silent on the specifics of its response strategy.

Rising Cases of Fraud and Technical Vulnerabilities

Unfortunately, this episode is part of a broader issue affecting Kenya’s financial sector, where fraud and technical vulnerabilities are estimated to cost banks $130 million annually. As a matter of fact, the Kenya Financial Reporting Centre flagged over $600 million in suspicious transactions last year, with much of it tied to card fraud, corruption, and other forms of financial mismanagement.

Moving Ahead

With a rise in demand for seamless banking grows, KCB’s experience is a small part of the challenges digital banking faces in balancing innovation with robust infrastructure. It is hoped that the solutions being deliberated by the industry will be effective in combating these challenges.