Home Articles How to Mitigate Online Banking Fraud through CPFR

How to Mitigate Online Banking Fraud through CPFR

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With the RBI tightening its fight against online frauds, the upgraded Central Payment Fraud Registry is the right tool. Read on to know more about it…

From past several years, several people in India fall prey to a online payment fraud. Many people who are uneducated and senior citizens who are victims of online banking and payment frauds are helpless against the system. They have to run from pillar to post to convince the banking authorities and get a police complaint registered and later get hold of their hard-earned money. Such banking frauds areĀ  a big let-down for the digital payment ecosystem as it becomes all the more tough to on-board customers and get them to trust these channels. Given the high rate of online banking frauds, the Reserve Bank of India (RBI) has swung into action and brough in place the mechanism of Central Payment Fraud Registry (CPFR).

The System
With the RBI’s decision to set up a CPFR, all stakeholders — from banks, technology service providers and fintechs — will get access to the registry for near real-time fraud monitoring, and the data is to be published to educate customers on the emerging security risks. Till now, banks report banking frauds to the RBI’s Central Fraud Monitoring Cell. While there is a Central Fraud Registry (CFR) in effect from January 20, 2016, this largely covers corporates and some aspects of retail. But the new Central Payment Fraud Registry is dedicated to all kinds of payments. So the CFR has played its part and the CPFR has taken over the system. According to CFR data, in Financial Year 2015, 2016 and 2017 — 13,083, 16,468 and 13,653 cases of frauds of Rs 1 lakh and above on Automated Teller Machines (ATM), debit card and Internet banking platforms were reported by various banks.

While private credit bureaus in effect, registries — Credit Information Bureau (India), Equifax, Experian, and CRIF Highmark — have been operational in India under the Credit Information Companies (Regulation) Act of 2005, which focuses on data analytics to provide credit scores, allied reports and services, there has been little to show by way of a big step when it came to registry of frauds. Part of the problem is the manner in which ecosystem participants on-board and service customers. While Know-Your-Customer (KYC) norms may be strict, to the extent, the touch-points now include banks, fintechs, and e-commerce firms, you have many more soft spots to guard against.

Digital Information
In the digital world, online frauds happen in real-time; and you have no “blood-trail” as such to follow; and fintechs basically chase phantoms. As it turns out that the fintechs need not have to wait to get a sense of the vulnerable areas through trial and error. Several new entrants can use the information in proprietary manner as Co-operative banks can also gain from the move to set up the CPFR. According to RBI, a detailed framework for setting up the CPFR is to be put in place by the end of October 2019. This move is in line with the RBI’s ‘Payment System Vision 2021’ which envisages a framework for collecting data on frauds in the payment systems.

The Reserve Bank of India said that such data can be used analytically for differentiating fraudulent and legitimate transactions; oversight and supervision, and also for providing guidelines to entities for minimizing risks of similar frauds.

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