Tackling the Rise of Emerging Scams and Fraud in India

By CK Leo, FICO’s Head of Asia-Pacific Fraud, Security and Financial Crime

India is one of the most receptive nations in the world towards digital banking services. According to a FICO survey, 95% of consumers in the world’s second most populous countries do all or most of their banking online. This nation is also open to new digital banking services. Banking customers in India have enthusiastically embraced real-time payments, with 78% adoption this year, significantly higher than customers in major economies such as the US (26%) and Germany (20%).

The convenience offered by digital banking has seen its popularity grow significantly
during the pandemic, but it has also made it a honeypot for fraud. Scammers are attracted by increased money flow, growth of some inexperienced users and
finding new ways to defraud consumers online where money is exchanged.

Top Fraud Threats in India
As customers in India embrace new technology-enabled banking services and new ways
to send money in real time, they face other fast-growing fraud threats. Real-time payment systems such as India’s Unified Payments Interface (UPI) have been a prime target for fraud as the volume of transactions on the platform is growing at a blistering pace. One issue is that the platform is often used to transact small amounts, where hardly any authentication or verification checks are used, making users more vulnerable to fraud.

Authentication controls may also have limited effectiveness when fraudsters manipulate
consumers or individuals of a business to transfer money to a controlled bank account
by the fraudster, also known as authorized push payment (APP) fraud. The complexity
of these scams is that the victims are led to authorize these payments themselves,
which makes it particularly difficult to detect and prevent.

What is of concern is that not all customers may be aware of the risks associated with new
banking services such as real-time payments. As the money is transferred almost instantaneously, to a
peer or trader, this means victims have no window of time where they can
try to reverse a payment once they realize they have been scammed. Fraudsters too
quickly launder it through multiple accounts, making it difficult to trace.

FICO’s survey found that Indian consumers were most aware of the threat of
Push Payment fraud allowed. Fifteen percent of Indians said it was the type of fraud they were most concerned about. This was much higher than in the United States (4%), the United Kingdom (7%),
Indonesia (3%) and Thailand (8%).

Given that 80% of Indians plan to increase the use of real-time payments, this demonstrates the emerging threats posed by scams and the need for banks to increase their
bank security game and adopt real-time fraud prevention.

How to fight existing and emerging scams
While it’s important to offer customers the convenience of instant transfers, banks need to instill trust in these systems. Real-time payment protection requires analytics that look for changes in customer behavior such as user accounts or devices outside of their usual habits, as well as usual anomalies such as time of day or frequency of a transfer. Using targeted customer behavior profiling to spot scams is showing impressive results with 50% more fraudulent transactions detected.

Beyond these analyses, communicating with customers at the right time is also essential. We know that scammers rely on creating a sense of urgency, so the ability to dynamically add a “pause” to the transaction gives the customer time to think things over and a way to forgo making the payment.

Consumer education is another important tool that banks can use to increase customer awareness of this type of fraud. By communicating regularly with customers, banks can provide helpful advice on fraud prevention and practical checks that individuals can follow to protect themselves. It is also crucial that banks encourage their customers to keep their contact details up to date so that they receive timely fraud alerts.

While scams that trick customers into sending money are currently a concern
other types of fraud where criminals use people’s card details or take control of their accounts
also have a significant impact.

The many and diverse ways in which financial scams are carried out mean that multi-layered security measures are needed to protect customers, businesses and banks.

For example, sophisticated digital identity and authentication solutions create better
security level of products and channels. In India, SMS (42%) remains the first choice for customers to verify payments due to its convenience. But this first-generation verification method can be easily compromised by scams such as “sim swap” where a fraudster gains access to your one-time SMS passwords by tricking your phone company into activating a SIM card they control. .

As customers move to other channels like third-party messaging and banking apps
For payment verification, banks need to consider multiple authentication factors for a
layered approach to security. This includes using the tools available to them, such as the biometric authentication that consumers are increasingly familiar with, such as fingerprint and facial recognition.

Another key recommendation is to reduce information silos. Effective Fraud Prevention
depends on having a single view of the customer, their transactions and their behaviors. For banks that have different transaction monitoring and fraud solutions, it’s important to break down those silos and overlapping features and work together. Integrated
solutions can act faster to spot suspicious transactions across different lines of
company, accounts, channels and devices.

Use AI and machine learning to stop fraud
With the sophistication of scams rapidly evolving, banks need to strategically innovate with cutting-edge scam detection analytics to effectively combat fraud.

Artificial intelligence (AI) and machine learning-based analytical technologies include
sophisticated behavioral biometrics capabilities and scam detection scores that can help
detect and prevent fraud. By analyzing customer and contextual data from a range of sources and behavioral biometrics, these technologies can significantly improve detection accuracy, identify the types of fraud taking place and inform decision-making in
in real time to quickly stop fraud.

It is becoming increasingly clear that siled, on-site and targeted solutions are a
major loophole exploited by criminals. They test everything from how authentication checks are performed on products and channels to the types of activities and dollar amounts that trigger verification checks.

An enterprise-wide integrated fraud platform enables banks to design and adopt rules
dynamically to emerging fraud types and run machine learning models based on
targeted profiling of customer behavior to determine what is a scam and what is normal
banking activity.

Ultimately, it is a win-win situation as Indian banks can improve operational efficiency, reduce
fraud losses and achieve higher levels of customer satisfaction.

Previous IIM Amritsar to Offer Executive MBA in Delhi Region / NCR - India Education | Latest Education News | World Education News
Next Prominent Macroeconomist Ricardo Caballero Appointed Term MAS Professor at NUS – India Education | Latest Education News | World Education News