Indian Lenders Spend Nearly Rs 5 On Every Fraud Of Re 1
The costs include losses due to fraud, internal labour expenses, external costs, legal and expenses on lost/stolen merchandise.
Financial services companies in India spend at least five times the monetary value lost in fraudulent transactions, according to a report by LexisNexis Risk Solutions released annually.
In India, retail companies incur an average cost of Rs 3.07, while for financial institutions it is Rs 4.64 for every Re 1 lost to frauds.
These costs include financial losses due to fraud, internal labour expenses, external costs, legal costs and recovery fees, along with the expenses associated with replacing or redistributing lost or stolen merchandise.
According to the Reserve Bank of India's annual ombudsman report for FY23, 7.03 lakh complaints were received at the RBI's complaints processing centres, showing an increase of 68% over the previous year.
As regulations for financial services are extensive in nature and require additional investigative efforts and liability when refunding consumers, the total cost of fraud is higher than retail companies, the report said.
About 80% of Indian respondents in the survey said that increasing instances of fraud are influencing customer satisfaction and consequently, customer conversion rate. This is higher than what was observed in the Asia Pacific region.
Further, frauds related to promotion or policy abuse grew 81% in India in the 12 months-ended August 2023, followed by a 69% rise in chargeback-related scams.
Given the rise in emerging technologies and digital adoption, financial institutions are identifying increasing trends in identity theft, scams, and digital wallet fraud. As the scamsters are innovating on ways of defrauding consumers and financial institutions, the need for forward-thinking fraud management and authentication solutions arise, the report commissioned by Forrester Consulting said.
This means leveraging the capabilities of cutting-edge technologies such as AI, machine learning, and biometric and behaviour-based authentication methods.
However, less than 40% of respondents' organisations in India have a broad suite of solutions to mitigate against fraud risks. More than half of these organisations have a medium range of fraud risk solutions, the report said.
