The financial services sector has witnessed a steep rise in digitisation with a lot of fintech companies paving the way forward. People today prefer going online for availing all the banking services, right from opening a new bank account to checking their transactions, from depositing money to opting for a Fixed Deposit (FD) or even for applying for a loan.
In fact, according to recent findings by Ernst & Young, COVID-19 has also led to an increased digitisation in the banking sector due to strict lockdowns which required people to conduct most of their banking activities online.
This is where fintech companies stepped in. They helped empower businesses to streamline their processes and scale their services. They have carved a specific niche for themselves by merging the best of what technology has to offer with the latest financial needs of different organisations.
One of the most important aspects of the financial sector which fintech companies have been able to successfully address is the need to keep a check on and prevent frauds. Given the rising number of bad loans and NPAs, this holds much significance.
Fintech Innovations are Empowering Businesses Prevent Frauds & Defaults!
Here are a few ways fintech innovations are leading the way for prevention of frauds and defaults and in turn empowering businesses in the process!
1. Modern Loan Management Systems:
Digital lending is all set to rise in the coming years. According to the ‘Digital Lending Report’ by the Boston Consulting Group (BCG) in November 2018, the market of Indian digital lending is set to cross $1 trillion over the next 5 years.
In order to meet this demand, banks and financial institutions need to adopt reliable loan management systems that will not only help make loan processing quicker and easier, but also provide adequate tools to eliminate the possibility of any frauds.
Fortunately, there are such modern loan management systems available today that blend in seamlessly with an organisation’s existing operations. Such systems help automate the lending processes by deploying artificial intelligence. Automation of the manual processes help nullify the scope of any frauds or errors creeping in, thus helping businesses maintain sanctity of their operations.
2. Bank Statement Analyser:
Credit check is an important and mandatory compliance which needs to be undertaken by banks and NBFCs. Banks usually ask for the individual’s past six-month or year’s bank statements to understand their financial behaviour. However, the legacy process of doing this manually requires a lot of time and effort going through pages after pages of transactions. Not to mention higher chances of human errors creeping in.
Here, bank statement analysers have come as a great saviour. These BSA engines can parse thousands of transactions within a matter of minutes, thereby empowering banks to onboard more customers by improving their KYC processes. Some examples of transactions which BSAs can look into and which are indicators of fraudulent or suspicious activities are:
- Circular transactions
- Frequent cash deposits and withdrawals
- Cheques returned or bounced cheques
- Equal debits and credits
3. ML-Powered Creditworthiness Check:
Despite India’s financial inclusion initiatives, a number as large as 190 million Indian adults do not even have a bank account, according to a 2017 report by the World Bank. This huge gap in financial literacy needs to be addressed.
At the same time, there is no denying that these people approach various banks and NBFCs to procure loans. But only rarely do their applications get the right weightage. Banks need to have proper mechanisms in place to verify the credibility of such customers as well as reduce the risk of defaults.
Fortunately, everyone carries a smartphone today and performs digital transactions, which are available in the form of digital footprint data. A lot of fintech companies are helping out in this space by taking cues from machine learning to arrive at a customer’s transactions behaviour by using the digital footprint data available. This is expected to be the dawn of financial inclusion in India.
4. Secured Remote Customer Onboarding:
The pandemic has brought digital lending to the limelight. This has forced lenders to enable digital methods of processing the piles of pending and new loan applications. There is a definite need to ramp up loan application processing, which will help speed up customer onboarding in a manner that is quick and of course, digital.
A robust lending management solution can be key to processing high-volume data while digitally onboarding customers. They come inbuilt with data-analytics that flags unusual or suspicious user behaviour, thus minimising chances of risks or frauds.
Besides this, a systematic API integration that offers secured ways to offer loans is also a must-have. For example, e-signatures is a mandatory integration feature that all lending institutions must include, which is error-free and secured.
5. Biometric Technology:
There are a lot of payment channels available at the disposal of customers today both physically as well as digitally, mobile apps, ATMs, online modes etc to name a few. It is simply not possible for banks and NBFCs to keep a check on all payment transactions, especially when debit cards, credit cards or even ‘one-time-passwords’ (OTP) are being stolen to commit frauds.
In order to combat this, fintech companies are increasingly relying on biometric sensors which completely eliminate the usage of physical debit or credit cards. Advanced technologies that use fingerprint sensors, palm, eye recognition etc to identify the real account owner’s identity are being deployed at ATMs in order to provide a much more secure user experience.
Along with this, the concept of digital wallets has gained considerable popularity as well, which works on similar technology and renders forging transactions impossible for fraudsters.
With rampant frauds taking place in businesses, fintech companies are actively jumping on the bandwagon to prevent them from taking place by bringing in robust mechanisms which can be readily implemented.
Precisa is an ML driven bank statement analyser that can help analyse over 15000 transactions in up to 6 minutes. It can provide an authentic and quick report of the creditworthiness of an applicant and help banks arrive at more accurate decisions.