(This article was first published in The Economic Times.)
Every year on the 28th of January, major countries and economies from around the world celebrate International Data Privacy Day. The day is hallmarked as an international effort to create awareness about the importance of respecting privacy, safeguarding data and enabling trust.
From an Indian context, the Data Privacy Day is of major importance in 2024, especially given our burgeoning digital economy. The government, regulatory bodies, financial institutions and private companies have been putting in relentless efforts over the past several years to make the dream of Digital India come true.
The digital revolution in India & rising payments fraud
The adoption of digital means in every aspect of life is increasing, but so are the concerns of digital privacy. In fact, I believe that concerns around data privacy could be the biggest roadblock in the way of India becoming truly digital. This is truer in the realm of digital payments. According to RBI data, in 2022-23, nearly half of the total frauds reported in the banking system were related to digital payments. This amounted to frauds worth Rs 276 crore!
It doesn't need to be said that digital payment frauds need to be reined in. The Indian digital economy is booming. The population, even in smaller cities and towns, is becoming increasingly tech-savvy. Digitization is reaching newer parts of our vast nation, bringing in immense opportunities. But unfortunately, there is also a higher number of fraud tactics.
Emerging trends in digital fraud
The flip side of technology is that fraudsters also leverage it faster than ever. This is why banks and other financial institutions need to continuously adapt their fraud management strategies to stay ahead of the curve. Failure to do so can put not just finances at risk, but also customer trust and eventually, brand reputation.
Some worrying trends in India include:
- Social engineering scams: Phishing, vishing, and smishing attacks are on the rise, tricking users into revealing sensitive information or clicking malicious links
- Targeted attacks: Fraudsters are increasingly personalizing their tactics, using deepfakes and data breaches to gain access to accounts
- Mobile vulnerabilities: The rapid adoption of mobile banking has opened new avenues for fraud, such as SIM swapping and malware injection
- Synthetic identities: With access to stolen data, criminals can create fake identities to apply for loans and credit cards
The need for adaptive fraud management
In the wake of such sophisticated frauds, traditional static fraud detection systems are falling going to fall short. Banks and financial institutions need to be proactive, agile and flexible in their fraud management.
And of course, we cannot forget the contribution of our regulatory bodies towards data protection and privacy. From RBI's Payment and Settlement Systems (PSS) Act, 2007 to the Digital Personal Data Collection Bill, the government has always emphasized the need for a robust fraud management framework. RBI's recent proposal of a cloud facility for the financial industry for enhanced data security is also an initiative on the same lines. This cloud facility will ensure security, integrity and safety of data in a structured and scalable manner on the cloud.
On the whole, I believe that the future of fraud management and mitigation lies in collaboration and continuous learning. Adapting to the evolving fraud landscape is not a choice, but a necessity for Indian banks and financial institutions. By leveraging technology, fostering collaboration, and prioritizing customer education, institutions can build a robust defense against sophisticated threats and safeguard their future in the digital age.
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