HomeFinance NewsSynthetic ID scams haunt banks as virtual onboarding becomes a norm amid pandemic

Synthetic ID scams haunt banks as virtual onboarding becomes a norm amid pandemic

Among the new threats, synthetic identity frauds have emerged as the biggest concern for banks and financial institutions across the world

Profile image

By CNBCTV18.com Contributor November 12, 2021, 5:39:19 PM IST (Updated)

Synthetic ID scams haunt banks as virtual onboarding becomes a norm amid pandemic
The outbreak of the COVID-19 pandemic, and the series of prolonged lockdowns, fundamentally changed the way we live. Be it work, learn, shop, or bank, life as we knew it shifted to the safe confines of our homes. The once-in-a-generation disruption led to a marked shift in consumer behaviour -- with brick-and-mortar stores shut, people had no choice but to go online to buy even everyday essentials, providing further fillip to digital transactions.


Businesses and financial institutions, too, had to bulk up their online presence to meet and onboard new customers virtually.

In India, the number of digital transactions logged a growth of 28 percent even as it fell by 13 percent in terms of value. UPI (Unified Payment Interface) transactions alone rose by a staggering 92 percent to reach 41 lakh crore in 2020-21. However, as online payments became a way of life even in the hinterland, cybercriminals worked overtime to make the most of the situation.

Modern-day con artists have adapted to the brave new world and moved on from phishing, credit card frauds and UPI scams targeting individuals to far more sophisticated, tough-to-detect methods that target institutions as well.

Among the new threats, synthetic identity frauds have emerged as the biggest concern for banks and financial institutions across the world. In such cases, a fraudster creates a fake identity using, say Aadhaar, of one person and combining it with information, like photographs and date of birth, about multiple other persons with data scoured off social media platforms. They use this identity to create a fake bank account, build up a positive credit profile and borrow money from the banks with no intent to repay.

Synthetic frauds are notoriously difficult to detect as it does not involve any impersonation like traditional scams. In these cases, scamsters create an entirely new identity to cheat financial institutions and authorities can spend weeks, if not months, trying to hunt down people who exist only on paper.

Such scams cost businesses billions and institutions need an efficient process to confirm the identities of their clients/customers, particularly at a time when remote onboarding has become a norm. There is a pronounced need to invest in cutting-edge methods of identity checks, such as document verification, image analysis, and biometrics powered by AI. Only these extra layers of security can stop scamsters and reduce instances of synthetic ID frauds.

This is where new–age, tech-backed platforms come into the picture. Such fraud and risk management platforms leverage advanced fraud behaviour modelling and analytics. The technology is designed to provide a risk score for every transaction in real-time, allowing banks and digital payment services to identify potential fraud. Top banks using such technologies have saved almost Rs 3.38 crore in the last 3 months alone by detecting over 3100 confirmed fraud cases.

With such self-learning fraud detection systems by their side, banks the world over can identify potentially fraudulent transactions, prevent such fraud while also offering a seamless experience to their customers. In a market where digital payments and related security breaches are on the rise, there is simply no other option.

The author, Suresh Rajagopalan, is CEO at Wibmo. The views expressed are personal
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!