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Banking Frauds on the rise

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DQI Bureau
New Update

According to an Indian Banking Fraud Survey conducted by Deloitte in 2012, banks have witnessed a substantial rise in the number of fraud incidents in the last one year itself with nearly one-in-four institutions having encountered over a hundred incidents of fraud. The average loss for several of these enterprises was as much as Rs 10 Lakh per incident.

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With the Indian Government and the Reserve Bank of India (RBI) making a push for citizens to increasingly start using online banking services, the growing number of online frauds is proving to be a deterrent. It is crucial for banks to establish trust with its online customers as the foundation for a safer and more convenient digital world.

What Banks should Do...

Banks can take simple and cost-effective steps to reduce the exposure to common frauds, thus limiting financial loss and reputational damage.

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EMV Cards can Eliminate Fraud-for Both Online and Offline Transactions

With more and more people in India using their credit/debit cards to make transactions, the incidents of frauds have increased dramatically on account of cards being lost/stolen, data being compromised and cards skimmed/counterfeited. As directed by the RBI, the EMV (Europay, Mastercard, and Visa) standard has to be implemented by all banks by June 30, 2013. The EMV-a global standard for inter-operation of integrated circuit cards for authenticating credit and debit card transactions-enables greater security for both offline transactions and online transactions.

Offline Transactions: In the world of physical points of sale including ATM's, counterfeit and lost/stolen fraud has become inherent. The EMV cards microprocessor chip securely stores information and security credentials in an encoded format. This provides greater protection, than the standard magnetic stripe being currently used, deterring frauds. Each EMV transaction uses a unique code which makes it impossible for fraudulent transactions to take place using data from the card

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Online/Phone Transactions: Using dynamic encryption to authenticate the card, EMV makes online and phone transactions safer. EMV card and its back-end authentication infrastructure act as a base for strong, dynamic cardholder authentication using one-time passwords (OTP). Using an EMV card and PIN verification through a handheld device, consumers can generate and enter an OTP for authentication during an online transaction at the bank's end.

 

Using advanced encryption, embedded card risk analysis capabilities and online and offline authentication, an EMV card makes most of the traditional methods used to steal card data or to clone cards either worthless or at the very least, very difficult to accomplish.

Making E-banking more Secure

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Banks around the world are moving rapidly to expand their online presence and customer base with ATM transactions and online banking transactions costing less than 10% of branch transactions. From a consumer perspective, according to Ernst & Young's Global Consumer Banking Survey 2012, 36% of Indian consumers prefer online banking for simple transactions in comparison to 25% who prefer branch banking.

However to further enable this growth of e-banking, banks need to step up their game and provide greater security with their products and services while gaining their customers' trust.

As in online and phone transactions OTP acts as a great tool to make e-banking transactions secure as well. Adding to the layer of security, banks can also provide challenge-response tokens secured by PIN, OTP tokens and smart card readers to its customers, authenticating the customer's identity during an online transaction. Additionally, depending on the risk level of a transaction, card readers can also display contextual dialogs making the customer more involved in the signing process.

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To enable these security features, however, banks need to deploy secure authentication servers which support such varied e-banking authentication products and the bank's legacy system without any software installation at customer's end.

Mobile: Another Front to Safeguard!

India has roughly 864 mn mobile connections with an overall mobile penetration of nearly 70%. In comparison to this, only 40% of Indian households have bank accounts where number of households in India is 330,835,767.

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However concerns around mobile banking security continue to be a major obstacle in its wider adoption. Just like in e-banking, multi-factor authentication is a strong deterrent to fraud in mobile banking too. Security features such as Micro-SD cards or Trusted Execution Environment (TEE) are simple to implement and dramatically add security to mobile transactions.

The smart card technology in Micro-SD cards or SIM cards makes them tamper-proof and provides banking-grade security. This secure element addresses the consumer's security concerns around storing confidential financial data. Adding to this, the implementation of TEE, which creates a secure execution environment within the device's software and hardware, prevents unauthorized access of the financial applications or data.

Conclusion

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With banks looking at m-banking and online banking to increase their consumer base and find new channels of generating revenue, banks need to address customer concerns around security of these services. Security is a major concern and banks need to leverage the latest technology to implement measures addressing the consumers' concerns and keeping fraud at bay. Implementing stringent security measures will help banks to imbibe trust among its customers, increase loyalty, reduce overheads, and support the overall growth of digital banking.

 

 

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