Tighter norms key to curb fintech frauds: RBI
Says digitalisation can expose consumers to risk of cyberattacks, data breaches, and often times, some financial harm
These new risks must be addressed through robust regulatory frameworks, enhanced cybersecurity measures, and increased consumer awareness initiatives - Swaminathan J, RBI Deputy Governor
New Delhi: Robust regulatory frameworks are needed to protect customers from misuse and fraud resulting from rapid digitalisation in financial services and proliferation of fintech platforms, RBI Deputy Governor Swaminathan J said while speaking at an event in Paris.
Addressing the Global Money Week 2024 earlier this week, the Deputy Governor said the Covid-19 pandemic accelerated digitalisation in financial services, prompting a swift transition to online mode by service providers and customers, according to an RBI statement. Accompanying this surge in digitalisation was also the proliferation of fintech platforms, he said.
Often operating outside the regulatory envelope and unconstrained by legacy systems that typically encumber traditional banks, fintech companies exhibit remarkable agility and adaptability in offering customised financial products, Swaminathan added.
“These developments are indeed welcome. However, while they offer immense benefits such as accessibility and hyper-personalization, they also heighten the risk of misuse and fraud. They can expose consumers to risk of cyberattacks, data breaches, and often times, some financial harm,” he said.
The senior RBI official emphasised that consumers may struggle to resolve disputes or obtain compensation due to lack of transparency on the part of such players. “These new risks must be addressed through robust regulatory frameworks, enhanced cybersecurity measures, and increased consumer awareness initiatives,” he said.
The Deputy Governor also shared some of the approaches adopted in India through regulation, supervision and enhanced consumer awareness. He elaborated on Indian regulations and supervision, including the requirement of multi-factor authentication for most of payments through electronic modes and fund transfers, guidelines on digital lending, and national cyber crime reporting portal.
“Despite all these measures, instances of unauthorised transactions due to compromised credentials from phishing attacks or customer negligence are not uncommon,” Swaminathan said. The RBI therefore, makes concerted efforts to foster a culture of financial prudence and resilience through customer awareness and education campaigns, he said in his speech on topic ‘Safe banking practices – protecting the young’.
