DDB Mudra’s Mehak Jaini says financial fraud is a deterrent to financial inclusion in India and examines how brands and institutions are critical in helping Indians along their journey towards financial literacy and prudence.
This article is part of a Spotlight series on the Fintech Revolution in India. Read more
With financial technological advancements and the prioritisation of financial inclusion, scams and frauds too have been rising. Fraudsters prey on the naivety of consumers, their inexperience with financial platforms and social engineering methods to dupe people of small and big sums of money.
Reserve Bank of India (RBI) data shows that fraud to the tune of ₹60,414 crore was witnessed in 2021-22.
“Collectively, the bank frauds have resulted in India losing at least ₹100 crore every day over the past seven years," reported RBI.
An August 2022 Mint report stated that 42% of Indians surveyed experienced financial fraud in the last three years and 74% of those who experienced it failed to get the money back. And the boon of digital payments has also led to a 35% increase in online payment fraud cases reported across India from 2019 to 2021.
A growing sense of negativity
Financial frauds or scams have a huge impact on the perceived sense of security and trust, and could be major deterrents to the uninitiated or unbanked. Frauds have power because bad news spreads like wildfire. There is an inherent negativity bias in all of us – the natural human tendency to focus on the bad side rather than the good.
For banks, PSUs, fintech startups and industry bodies, it becomes pertinent to build a more financially literate and prudent customer base. The majority of the scams in India tend to be social engineering frauds – scams used by criminals to exploit a person’s trust in order to obtain money directly or obtain confidential information to enable a subsequent crime. People fall prey to such socially engineered scams either out of overconfidence, greed, a sense of necessity or urgency, or scare tactics. Stories of how a Mumbai man lost 25 lakh after clicking on a malicious link, or INR 50 lakh lost in SIM-swap fraud where a man was targeted by missed calls, or the INR 2 lakh lost after a woman shares three credit card pictures while placing a liquor order online, are quite common despite countless PSA campaigns by brands to not share one’s OTP or UPI PIN. The spontaneous panic response overpowers any sense of logic and patience when facing a fraudster.
RBI has roped in celebrities like Amitabh Bachchan, cricketers, athletes and even rap artists to drive public awareness campaigns around financial fraud.
Private banks like HDFC have created an entire support system under the banner of Vigil-Aunty, your friendly neighbourhood aunty guiding you against financial scams. Meanwhile, brands like Google Pay and RBL showcase positive stories of scam awareness and alertness that have helped customers stay vigilant and block any such deviant calls or messages.
NPCI has launched campaigns with lead protagonist Mrs Rao to demystify the world of UPI payments, building confidence in the security the platform provides.
So what should be the focus of brands, institutions and industry bodies going forward?
We must ask ourselves, what metric would signal success? What metric would signal a move towards a more financially literate and financially prudent society?
As awareness rises, so will reporting. Is that the best indicator? Will a heightened volume of conversation on the topic create more fear in the market? Or will it have the right effect? Instead of only measuring cases reported, would it be beneficial to measure scams avoided or blocked by customers?
To quash the rapid advancement of financial fraudsters in India requires a collaborative effort by tech giants like Google and Meta, government bodies/banks, payment platforms and tech corporations like NPCI, and the cybercrime department of India. And as tech evolves rapidly, public policy too will need to keep pace. All of this with the endeavour to serve customers with a friction-free financial ecosystem that is safe, trustworthy and agile, and where fraudulent behaviours can be flagged and acted upon real time.
Need of the hour
But beyond platforms and mechanisms to prevent, report and block scams, creativity, innovation and storytelling have a powerful role in today’s world of socially engineered scams. Can brands look at leveraging the power of students, teenagers and digital natives as their spokespersons for avoiding online fraud?
The finance influencers of today aren’t the same as 10 years back when grey hair and experience gave you that authority. Today’s influencers are inexperienced but knowledge-hungry, and willing to go above and beyond to understand the complex world of finances, investing and savings. They’re relatable, empathetic and prudent risk takers who guide their social network through understanding, not jargon.
Brands and institutions at large could also explore the Mindspace framework to influence consumer behaviour at scale. It was created by Ivo Vlaev and members of the Behavioural Insights Team from the United Kingdom's Cabinet Office to help categorise nudges based on underlying principles of behavioural economics and psychology. The Mindspace framework is a mnemonic for the nine effects on human behaviour used to explain and intervene in a variety of subject areas: messenger, incentives, norms, defaults, salience, priming, affect, commitments, and ego.
If applied correctly, it could lead to long-term shifts in India – defining the right defaults, incentives and norms that prevent fraud.
The journey to financial literacy and financial prudence is crucial to prevent financial frauds and truly bring everyone into the financial fold.