Online Frauds On the Rise: Here’s How Banks Are Fighting Them

Banks have long been fighting fraud. Advancements in technology have acted like a double-edged sword for the banks, on one hand, it has made their work easier, and on the other hand, more and more cyber fraud cases arise. As everything turns online, people who are not tech-savvy are more susceptible to cyber fraud. The Internet is becoming a darker place day by day, just a click of a link can empty your bank accounts, sharing an OTP with a stranger is like a catastrophe in the making. 

Banking fraud increased by nearly 300% in the last two years with 36,075 cases in the financial year 2023-24. Even though the number of cases increased, according to a report from Reserved Bank Of India the amount involved in fraud declined to Rs 13,930 crores from Rs 45, 358 crores in FY24. According to the report, 67% of frauds in FY24 were from private-sector banks while 75% were from public-sector banks. 

Online fraud cases on the rise 

According to an RBI report online fraud increased by 708% in the last two years to 29,082. The amount of money duped by fraudsters increased by 145% to Rs 1457 crore. Although a large number of fraud cases were from the Internet and cards, the largest sum of money involved was from loan portfolios. Of the total fraud amount,  Rs 13,390 crore reported in FY24, 84% came from advances, i.e. loan portfolio. 

What is standing in the way of Fraud Detection?

Reporting fraud long after the incident occurred is a significant roadblock in tackling the rising number of frauds. As online fraud and cybercrime rise, RBI plans to soon change the guidelines to permit banks to freeze accounts suspected of being used to commit fraud and cybercrimes. 

Internal government data shows individuals lost nearly $1.26 billion in financial institutions to cyber fraud since 2021. A source revealed that 4000 fraudulent accounts open every day. 

Many receive fraud calls trying to rob them by accessing their bank accounts and wallets. To get the money back, a victim had to first file a complaint and only then the bank would freeze the scammer’s account. This would take days altogether. But now to make things easy and swift RBI may allow banks to act before a victim files a complaint with the police, and suspend accounts. 

The suspensions would target accounts that banks suspect are being misused for cybercrimes. Agency data shows that in the last three months, banks have suspended 250,000 accounts used for fraud. 

A new centralized committee may be needed to investigate cyber fraud and online scams. There are many scams like fake apps, fake jobs, and fake gaming apps that many fall for, educating them on how to differentiate between what is likely a scam and what is real would be crucial to curb these scams. 

As technology gets smarter, so do the criminals. They get more sophisticated and find new ways to deceive people. The ease with which perpetrators can operate technologies and get information increases the burdens for the financial institutions to fight them. The only way to fight this is by constantly revisiting strategies to prevent fraud and stay ahead of the curve. AI is gaining prominence and cyber criminals use it to fool people by creating deepfakes, phishing campaigns, etc. This can be fought by using AI which can help banks detect fraud, investigate matters further and develop a strategy. 

(Author - Karishma is a content writer at Techdoquest. She offers fresh and youthful perspectives on whatever she writes about.)