[General Elections 2024] What will the new Government contribute to India's growing BFSI landscape?

[General Elections 2024] What will the new Government contribute to India's growing BFSI landscape?

Carthic Kameshwaran
Carthic Kameshwaran

May 10, 2024

Carthic Kameshwaran
Carthic Kameshwaran

May 10, 2024

One of the key pillars of the Indian economy is Banking and Financial services – and Indian regulators in BFSI have been known for their hawkish stand for decades. While their policies have both critics and supporters, they have been largely helpful in stabilizing the macroeconomic factors. But the headwinds in BFSI in the past few years have become more complex – partly due to the penetration of digital real-time systems and governmental policies (both state and central) and partly due to private industry innovation. 

As June approaches, all eyes are going to be on the new cabinet that forms in the world's largest democracy, and the subsequent policy-making in the BFSI sector. As a leader in the digital security and trust market, we wanted to outline certain expectations that address existing complexities. 

India ranks amongst the most digital infrastructure users (Mostly UPI, DBT, and Aadhar but also increasingly other services like ABHA, etc.) and this exposes most Indians to increasingly newer digital risks.

Indian BFSI is heavily targeted by not-so-friendly nations. There are various indicators and news articles that the nationals of those countries enable and control a huge network of fraudsters within India. To dismantle such networks (Mule accounts, Money Laundering, Crypto frauds etc. are some of the challenges), the government needs to move many steps forward, some of which are already in motion.

Following are major fraud risk areas that need Public-Private Partnership

Preventing such risks requires a multifaceted approach that combines technological solutions, legal frameworks, and public awareness campaigns. Here are some policy expectations that can help prevent identity fraud:

1. Strong Data Protection Laws

Implement robust data protection laws that mandate organizations to securely store and handle personal information within Indian geography. While the Digital Personal Data Protection Act is a step in the right direction, the implementation and follow-ups would be a true measure of the maturity of the economy. This is one area where the government must strike a right balance between Digital Public infrastructure and Private innovation. To enable the new age economy to grow and bring social equity, Private innovation must be allowed to provide services and flourish. Some parts of capitalism are necessary for societal growth.

2. Biometric Authentication

Encourage the adoption of complex biometric authentication methods such as Behavioural AI in addition to fingerprint, iris scans, or facial recognition for sensitive transactions. Biometrics add an extra layer of security beyond traditional passwords or PINs.

3. Two-Factor Authentication (2FA)

Improve the use of 2FA mandates for online accounts and transactions. The current 2FA like OTP are inadequate in today’s times and are prone to easy takeover. We recommend telco-based OTP-less Authentication as a SIM possession factor. 

4. Identity Verification Services

Utilize identity verification services that use advanced algorithms and machine learning to verify the authenticity of identities. These services can detect anomalies and suspicious activities in real time, flagging potential fraud attempts. This is especially crucial at the time of onboarding to determine potential Money Mules. Preventing Money mules would largely curb the flight of ill-gotten money to other nations.

Related read: https://www.bureau.id/blog/money-mule-score

5. Government Issued ID Verification

Require every online service provider to verify users' identities using government-issued IDs or other official documents. This helps ensure that users are who they claim to be, reducing the risk of identity theft. Here are the current RBI master directives on KYC and EDD. 

6. Education and Awareness Programs

Launch public awareness campaigns to educate individuals about the risks of identity fraud and how to protect themselves. This includes teaching people how to recognize phishing attempts, avoid sharing sensitive information online, and regularly monitor their financial accounts for suspicious activity. The new Government must launch programs to run campaigns in common public places like train stations, bus stations and the like.

7. Collaboration between Public and Private Sectors

Foster collaboration between government agencies, law enforcement, financial institutions, and technology companies to share information and best practices for combating identity fraud. This collaboration can help identify emerging threats and develop effective countermeasures. Let the private industry build collaborative network and bring value while the government controls the digital rails and policies. The current Cybercrime portal is a great first step but the efficacy can only be improved. 

8. Penalties for Non-Compliance

Enforce strict and steep penalties for organizations that fail to implement adequate security measures or knowingly engage in practices that put consumers' identities at risk. This can include fines, sanctions, or even criminal charges for egregious violations.

9. Regular Audits and Monitoring

Conduct regular (and more frequent) audits and monitoring of systems and processes to ensure compliance with data protection regulations and identify any vulnerabilities that could be exploited by fraudsters.

10. International Cooperation

Foster international cooperation and information sharing to combat cross-border identity fraud schemes. This involves coordinating efforts with other countries to track down and prosecute fraudsters operating across jurisdictions. Provide the ability for private organizations to participate in such frameworks. 

11. Embrace and promote Blockchain

Cryptocurrencies are here to stay irrespective of regulations and genuine alleys in policies will allow Crypto traders to carry on their businesses. Instead of resisting their growth, the government should promote them. In fact, the government should use the widespread knowledge of Blockchain and blockchain forums to push CBDC more and slowly reduce physical cash. This will not only foster innovation but also mitigate a lot of risks in the physical world.

Related read: How to protect your business from crypto-fraud

12. Improve Cybersecurity posture

Lastly, and maybe the most important, India is still known for its mediocre public cybersecurity posture. Some businesses have built strong cybersecurity mechanisms but the implementation in the country as a whole, is still weaker than expected. Investment in Public-Private cooperation and campaigns will attract greater investments across industries.

In a nutshell, we hope the new cabinet will focus on the above to make India a better destination for businesses than before.

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