Banks and lending institutions have been at the getting finish of loan defaulters and credit fraud for a lot of decades now, and it has turn out to be even more difficult in present instances. With the boost of digitization, the scope for fraudulent activities has improved additional, as diligence procedures haven’t kept pace with the rapid-altering technologies and their subsequent misuse.
It has turn out to be vital for monetary institutions to step up their diligence approaches to curb monetary losses that take place due to miscalculated onboarding of consumer accounts. Several tech-enabled fraud-detection services that are tailor produced for the BFSI sector have emerged in current years. However, the sector itself is gradually inching towards digitization and optimizing digital services. To limit harm triggered by fraudulent activities, banks need to have to adopt digitization and make certain the correct safeguards are in spot.
Let’s go via 5 important preventive measures banks in India can adopt to prevent fraud, correct from pre-sign up to collection. There are various areas in the consumer journey exactly where actioning timely checks and preventive measures is most likely to lessen frauds considerably.
One of the most crucial precaution a bank can take towards fraud prevention, is integrating emerging technologies in their systems. Many standard banks are however to take benefit of the digital revolution in the nation. Procuring and submitting forged documentation is not as tough as it utilized to be even 5 years ago, and the quantum of such applications has only improved. Digital verification of documentation by means of integrated tech is an vital step towards fraud prevention. Integrating Artificial Intelligence and Machine Learning enabled technologies has been a game changer for enterprises across the planet, and the banking sector will only advantage from adopting these into their systems.
Once documents have been verified to be genuine and original, we move on to the subsequent step in fraud prevention, due diligence. Due diligence covers a lot of elements that need to have to be regarded as just before extending loans to folks or small business entities. Within this the initially preventive measure banks can adopt is to screen public records of the applicants, thereby making certain their credit worthiness. There are various sources, verified by the government, to assess credit histories, employee facts, and other information that can contribute towards assessing their monetary status and therefore, their creditworthiness. All of this of course wants to be carried out with out compromising the safety and privacy of applicants.
An more layer of preventive actions that monetary institutions and banks can incorporate is the evaluation of monetary patterns of the entity or person. Tax filings, be it ITR or GST filings, are a very good indicator of the small business well being and validity of an entity. Lack of GST or ITR information is lead to for concern for any lending institution, as it can be an indicator of fraudulent intention or activities. In this case the subsequent preventive measure banks can take is to screen the entities for any damaging news that could possibly have been published in a provided time period against the applicant. News agencies are a very good supply of facts for banks to assess the validity of applicants. In this case, no news is very good news and a single can go on to the subsequent step in due diligence, nonetheless damaging news flags off concern, requiring a deeper dive into the applicant’s monetary and small business well being.
Lastly, banks should really leverage on the advancements in AI & ML technologies, to preemptively analyze patterns and understand from historical instances. Integrating technologies in banking processes, with out relevant interpretation and evaluation of information collected via them more than time, is suboptimal use of that distinct resource. Banking institutions should really ideally create or integrate advance models that aid predict future situations of fraud to proactively catch irregularities, and weed out suspicious applicants. Additionally, maintaining a track of announcements, updates and lists released by regulatory bodies such as SFIO and SEBI also aid banks place checks in spot to prevent fraudulent activities.
One ought to, at this point, comprehend that in spite of making certain all preventive checks have been performed against an application, there is nevertheless a possibility that the applicant is most likely to be fraudulent, due to the fact no method is foolproof. However, with the measure enlisted above, the probability of onboarding a fraudulent consumer is lowered considerably!
(By Omkar Shirhatti, Co-Founder & CEO, Karza Technologies)