Role of Technology in Fraud Detection within the Indian Banking Sector

Melissa IN Team | FinTech, India | , , , ,

The increasing levels of fraud have put every country on high alert. India, being a developing country, is not far behind, when it comes to being a victim of fraud. Since banks are the forces that drive the financial sector and the money market, they are most prone to frauds, putting them on the radar for forgery and cyber fraud.

Fraud can impact organizations in the different verticals; it can permeate into the financial, operational as well as psychological verticals, creating a never ending cycle of monetary losses. These monetary losses can cripple the organizations, and further cause dents to the reputation, goodwill and customer relations of an organization. In order to understand the scope of the fraud, whether internal or external, it is essential to have the necessary precautions in place, to avoid any unwanted issues.

Since banks deal with vast amounts of money on a day to day basis, they have to employ multiple security points to preserve the safety and integrity of their financial transactions. These are also known as cryptographic check hurdles. This is not all; banks should ideally rotate the employees who are working on sensitive data by keeping a strict vigil on the technologies involved, while engaging more than one person within the large transactions.

Squashing fraud, the organized way

There is no fool proof way of squashing fraud; however, by mixing the right type of technologies, treasury executives can go a long way in reducing the organizational risk. A well thought of mix of solutions and fraud prevention techniques, fused with multiple layers of protection and fraud prevention controls can mitigate the incidents of fraud.

But the fact to consider is, technology is changing at a rapid pace, and so is the banking experience for users. With the changing face of technology and banking methods, fraudsters are getting new and improved ways to hack into these systems, taking fraud to an all new level. In other words it is an endless game of “cat and mouse.” There is an uncontrolled race between cyber criminals and financial institutions, which is furthering the need to have a good technological base for Fraud prevention.

Combating fraud, the technological way

Adopt the right technologies: Technology has been designed to provide utmost security and can be used to prevent fraud, in all domains of the banking world. However, with the amount of data churned every second, this might seem like a mammoth task. This does not have to be the case, especially if banks adopt the right technological solutions to meet your bank’s needs. There are a series of KYC software, which rely heavily on the pay and payee verification procedures, which are just the stepping stone in customer verification procedures.

Spruce up your internal controls: As per the Sarbanes-Oxley law, companies are required to pay strict attention to their internal controls, and facilitate an excellent system of internal audit policies. But even these compliance mandates can’t prove to be a comprehensive approach for fraud protection. Organizations are putting in additional controls and mechanisms to protect their customers, which includes the likes of rigorous approval procedures along with separation of duties.

Screening employees during interviews: Maximum cases of fraud occur due to internal employees, who have access to sensitive information. Banks, especially the employees of the treasury sector, need to conduct extensive background checks, in order to ensure the right employees are being hired in key positions.

Employing technological advancements and security updates: Since banking is available on fingertips, the use of apps and net banking has opened up another world of fraud, often regarded as cyber crime. In order to ensure maximum security for customers making use of online banking or app banking, there need to be push notifications and security updates need to be fused within these services, in order to avoid any cyber crimes. This way, customers will not lose trust in the banks, while the banks can also benefit by enhancing their customer relations as well as cut down on monetary losses.

Technology’s role in combating fraud within the banking sector

It’s rather convenient to say that technology is a double edged sword; simply put, it is increasingly being used to conduct cyber crime as well as ensure safety features within the banking portals. But its uses are taking over, and leaving the cyber crimes behind. When it comes to fraud detection, there are various tools available, which assist in making precise decisions.