Can banks es­cape frauds?

Governance Now - - ECOLOGY -

I n mid-fe­bru­ary of this year, In­dian banks’ gross non-per­form­ing as­sets (NPAS), or bad loans grabbed the me­dia head­lines. A bunch of cor­rupt bankers and a di­a­mond mag­nate con­spired to laun­der money to the tune of Rs 13,000 crores. The busi­ness­man in ques­tion was Ni­rav Modi and the bank as­so­ci­ated with it was Pun­jab Na­tional Bank, the coun­try’s sec­ond largest bank. The sheer scale and du­ra­tion of the scam ex­posed that our bank­ing sys­tem is vul­ner­a­ble to frauds of unimag­in­able pro­por­tions. The coun­try was just be­gin­ning to come to terms with Ni­rav Modi’s smash and grab job when a new scam sur­faced. By Fe­bru­ary-end a yet an­other Rs 3,695 crore-scam un­earthed known as the Ro­tomac scam, in­volv­ing the Kothari fam­ily. The com­pro­mised banks in this case were a con­sor­tium of seven lenders in­clud­ing Bank of In­dia, Bank of Bar­oda, In­dian Over­seas Bank, Union Bank of In­dia, Al­la­habad Bank, Ori­en­tal Bank of Com­merce, and Bank of Ma­ha­rash­tra. If the PNB scam failed to set alarm bell ring­ing this one surely was a wake-up call. Mean­while, the state-run banks an­nounced their fi­nan­cial re­sults of 2017-18 FY which ex­posed the mon­ster of NPAS that emerged from this ex­er­cise was wor­thy of star­ring in its own hor­ror film. The ac­cu­mu­lated bad loans re­sult­ing from the non-per­form­ing as­sets re­ported by 26 banks to­gether amounted to Rs 7.31 lakh crore. The stag­ger­ing growth of 50 per cent in NPAS from the cor­re­spond­ing pe­riod last year re­vealed a lot about the ail­ing bank­ing sys­tem. Iron­i­cally, many fraud in­ci­dents hap­pened when the In­dian pay­ment land­scape was be­ing swept by in­no­va­tion in dig­i­tal pay­ments. The se­ries of prod­uct launched by NPCI in­clud­ing UPI, IMPS, BBPS, and Aad­haar En­abled Pay­ment Sys­tem her­alded the be­gin­ning of ex­cit­ing time for dig­i­tal pay­ments.

banks at cross­roads

While the plethora of pay­ments op­tions em­pow­ered the dig­i­tal-savvy cus­tomers, banks found them­selves stuck at a cross­road. Though the new modes of pay­ments gen­er­ated ad­di­tional rev­enue stream for a bank, the sit­u­a­tion on the ground couldn’t be fur­ther away from the truth. The PNB fi­asco re­vealed that be­sides large pri­vate sec­tor banks and State Bank of In­dia, very few of the banks had in­te­grated their back of­fice in­clud­ing core bank­ing sys­tem (s) with the SWIFT Fi­nan­cial mes­sag­ing sys­tem.

What is caus­ing this com­plex­ity?

Cus­tomer pref­er­ences rapidly change in In­dia whose 65 per cent of pop­u­la­tion is be­low the age of 35. The on­line shop­ping era has fu­elled a cul­ture of in­stant grat­i­fi­ca­tion among youth. To­day, youth ex­pect sim­i­lar im­me­di­acy in most of their in­ter­ac­tions in­clud­ing pay­ments. The banks will have to fall in line to cater to such tech-savvy gen­er­a­tion oth­er­wise they will end up los­ing busi­ness to Fintechs. The prob­lems don’t just end there. Most soft­ware sys­tems in a bank ac­cept and process data in a spe­cific for­mat. Be­sides, dif­fer­ent pay­ment and set­tle­ment chan­nels have their own data for­mat­ting and tech­nol­ogy stan­dards, which in­crease com­plex­ity of trans­ac­tion pro­cess­ing lead­ing to trans­ac­tion fail­ures. Proac­tive mon­i­tor­ing of sev­eral frauds and au­to­ma­tion of en­ter­prise-wide rec­on­cil­i­a­tion can in­su­late banks and its cus­tomers from po­ten­tial fraud­u­lent pay­ments. The risks man­agers in banks have a dif­fi­cult task to de­tect and pre­vent frauds orig­i­nat­ing from the fi­nan­cial crimes com­mit­ted both by in­ter­nal staff and cy­ber crim­i­nals. In In­dia, a huge num­ber of peo­ple have em­braced dig­i­tal pay­ment modes and there is a need to pro­tect the first-time users who can eas­ily fall prey to fraud­u­lent prac­tices. The rapid pro­lif­er­a­tion of the modes of pay­ments makes it im­per­a­tive to have an en­ter­prise wide rec­on­cil­i­a­tion process.

What is the so­lu­tion?

The in­dus­try needs a ho­moge­nous pay­ment land­scape dot­ted with core bank­ing sys­tem, en­ter­prise fraud man­age­ment, and uni­fied rec­on­cil­i­a­tion. The pay­ment en­vi­ron­ment should pro­vide the ca­pa­bil­ity of straight through pro­cess­ing for any type of trans­ac­tion, orig­i­nat­ing from any chan­nel for both cor­po­rate and re­tail clients.

about eps

Elec­tronic Pay­ment and Ser­vices (P) Ltd. is the fastest grow­ing Pay­ments Ser­vice Provider founded in 2011, by vet­er­ans with over 150 years of com­bined ex­pe­ri­ence in the bank­ing, tech­nol­ogy and re­tail pay­ments in­dus­try in In­dia. With a wide set of ex­per­tise and a com­mon goal, EPS was launched to ad­dress the de­mand for ef­fi­cient, se­cure and tech­nol­ogy driven prod­ucts and ser­vices for the bank­ing in­dus­try. Gain­ing the high­est level of vis­i­bil­ity in the mar­ket, we boast of our ro­bust end-to-end Au­to­mated Teller Ma­chine (ATM) Op­er­a­tions & Out­sourc­ing Ser­vices, as well as pro­vide a holis­tic range of ATM Man­aged Ser­vices en­abling banks to con­cen­trate on core bank­ing func­tions. EPS also pro­vides a best-in-class PCIDSS cer­ti­fied Trans­ac­tion Switch­ing So­lu­tion, which can drive all in­dus­try stan­dard front-end pay­ment de­vices. To sup­port the Min­istry of Fi­nance (Govt. of In­dia) led mis­sion driv­ing ‘Fi­nan­cial In­clu­sion’, EPS has aced in de­liv­er­ing re­sults, re­li­a­bil­ity and de­pend­abil­ity, hav­ing suc­cess­fully de­ployed over 12000 ATMS for 26 banks in ur­ban and ru­ral lo­ca­tions across In­dia. Along with a wide ar­ray of foot­prints in In­dia, EPS has ex­panded to the APAC re­gion in 2017 form­ing a wholly owned sub­sidiary of EPS (In­dia) known as Elec­tronic Pay­ment Aus­tralia PTY Ltd. EPAPL pro­vides a com­pre­hen­sive suite of pay­ment so­lu­tions and ser­vices that cater to ATM, POS, E-com­merce, pay­ment cards and all other dig­i­tal medi­ums of trans­ac­tions.

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