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Transforming India’s Digital Payments: The Rise of AePS and Its Challenges

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A Decade of Digital Evolution India’s digital landscape has undergone a remarkable transformation over the past decade. With the advent of digital payment channels such as UPI, IMPS, and net banking, the country has achieved unprecedented growth in digital transactions. Despite these advancements, one specific demographic—rural middle-aged to senior citizens—was not fully utilizing this ecosystem. To address this gap and make basic banking services accessible in areas with limited banks and ATMs, the government launched the Aadhaar Enabled Payment System (AePS). Introduction of AePS The Aadhaar Enabled Payment System, introduced by the NPCI in 2016, is a digital payment method based on the Unique Identification Number (UIN) linked to the Aadhaar card. It allows Aadhaar cardholders to conduct financial transactions via Aadhaar-based authentication without needing to visit a bank. Instead, these transactions are facilitated by business correspondents (Bank Mitras) using micro-ATMs. AePS empowers all sections of society by making financial and banking services accessible to everyone through Aadhaar. It supports seamless fund transfers, cash deposits, withdrawals, balance inquiries, and more. Additionally, AePS facilitates the disbursement of government welfare schemes such as NREGA, social security pensions, and old age/handicapped pensions. Exponential Growth Since its launch, AePS has seen a significant boost in utilization. In 2019, the revenue from AePS transactions was around INR 5 billion. Within five years, this figure skyrocketed to INR 51 billion in 2024, a tenfold increase. By 2025, it is projected to reach INR 67 billion. In 2023 alone, over 370 million customers conducted transactions through AePS, highlighting its widespread adoption and success. Rising fraud concerns However, the rapid growth of AePS has also attracted fraudsters, targeting the predominantly rural, middle-aged, and senior population. Over the past 2–3 years, numerous reports of AePS-related fraud have surfaced. For instance, in Hyderabad, a gang of cybercriminals was arrested for fraudulently withdrawing ₹14.64 lakh from 149 customers. Such incidents underscore the growing risk of cyber-financial scams associated with AePS. According to the Indian Cyber Crime Coordination Centre (I4C), AePS frauds accounted for 11% of cyber financial scams originating in India in 2023. Addressing Fraud: RBI and NPCI Initiatives In response to the increasing fraud cases, the RBI has instructed banks to streamline the onboarding process for AePS touchpoint operators, including mandatory due diligence. Additional fraud risk management requirements are also being considered. The NPCI has released circulars addressing customer withdrawal limits, account statements, and Business Correspondent (BC) onboarding procedures. Strengthening onboarding processes AePS providers must rigorously scrutinize the onboarding processes for business correspondent agents. This involves conducting comprehensive background checks to verify the authenticity and credibility of potential agents. Additionally, a risk-based categorization system should be implemented, where agents are classified based on an assessment of their history, including any previous instances of fraudulent activities or non-compliance. By adopting a detailed and systematic approach to onboarding, AePS providers can ensure that only trustworthy and low-risk agents are integrated into the system. Moreover, continuous monitoring and periodic reassessment of BC agents are crucial to maintaining high standards of integrity and security. Regular training and awareness programs should be conducted to keep agents updated on the latest security protocols and fraud prevention techniques. By strengthening these onboarding and monitoring processes, AePS providers can significantly reduce the risk of fraud and enhance the overall security and reliability of the payment system. This proactive approach not only safeguards the interests of users but also fortifies the reputation and operational efficiency of the AePS ecosystem. Common fraud scenarios One prevalent fraud scenario involves unauthorized cash withdrawals, where users receive no indication of the transaction. Fraudsters often impersonate fingerprints or deceive customers about the success of transactions. In some instances, BC agents have been known to use silica gel to replicate fingerprints, further complicating the detection of fraudulent activities. These sophisticated methods of fraud underscore the necessity for AePS providers to enhance their security measures and address these specific threats comprehensively. To combat these issues effectively, AePS providers need to strengthen their ecosystem and focus on specific patterns to identify and mitigate fraudulent activities. Key Areas of Focus Preparing for Future Challenges Currently, the primary issue revolves around cash withdrawals. However, with the increasing volume of fund transfers, there is a potential risk of anti-money laundering activities. As AePS providers continue to expand their services, they need to be adequately equipped to handle these emerging challenges. This involves not only detecting and preventing fraudulent activities but also complying with stringent regulatory requirements to ensure the integrity of the financial system. Conclusion The AePS industry is booming, and as it grows, fraudsters will seek new ways to exploit the system. To sustain growth and protect users, financial institutions must enhance fraud and risk management systems by investing in advanced technologies like artificial intelligence and machine learning for real-time monitoring and anomaly detection. Continuous education and training for users and service providers on potential risks and best practices are also crucial. By implementing robust security measures, the AePS ecosystem can mitigate fraud risks and continue to flourish, driving financial inclusion and transforming India’s digital payment landscape. Collaboration with regulatory bodies is essential to stay ahead of emerging threats and ensure a secure, seamless payment experience. With a concerted effort towards enhancing security and compliance, the AePS industry can thrive, paving the way for a more inclusive and digitally empowered India.

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Cross Border Payments in India

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What are cross-border payments? Payments or transactions done across borders are part and parcel of international trade. So, playing the role of medium between the vendor and customer, cross-border payment is one of the crucial entities that enables cross-border trade. Any export or import is dependent on cross-border payment, and its growth is crucially dependent on smooth and seamless transactions. Why are cross-border payments significant? The significance of cross-border payments is proportional to the significance of cross-border trade. The size of cross-border payments is significant, with export merchandise alone contributing to about 15% of the total GDP. This alone is enough to look into the cross-border payment facilities that we are enabling our traders with to boost our country’s economic growth. India is looking at becoming a $5 trillion economy, and one of the major contributors can be cross-border trade. However, the fact on the ground is that of the 17 states that share their borders with other countries, only nine of them can actively engage in safe trade. Digital India has thrown the doors to cross-border trade wide open to not just the conglomerates but also MSME in India. Talking of MSME contribution, Livemint.com reports that “In FY 2022–23, MSME products accounted for 43.6% of India’s exports.” What are the major challenges to cross-border payments in India? Charges: With different countries come different rules and different financial charges. Many of the charges are informed only at the time of transactions, which either the vendor has to absorb or charge to the customer, irritating them in the least. Cumbersome process: With most local banks dealing with only a few currency options, time is taken for the standard international payouts, and both time and transparency are lost. SWIFT and international wire transfers come with their own set of challenges with regards to cost and time. Risk of fraud: Digitalization has thrown the door open to not just traders but also to cyber criminals. Cybersecurity has been constant and updated with the ability to come up with new solutions for the threats emerging daily. And yet be cost-effective. Compliance changes: Different borders dictate different laws at different points in time. The law of the land is often tweaked to combat raising threats or cementing the loopholes of existing laws. Currency volatility: With VUCA, is it a surprise that every country has a relatively fluid economy when compared to the currency woes that have been an age-old story? Only the present digitization has removed the buffer that the lag of communication offered earlier. How do we provide a solution to one of the pillars of our economy? Fintech India needs its fintech industry to find a one-stop solution for not just an easy and transparent transaction but also a safe one. A solution that authenticates easily but with foolproof scrutiny. Though many start-ups are working on solving individual issues discussed, most of them are working on their expertise, which is limited to one area.  The need of the hour is an aggregator who would collect all this expertise on one platform and provide a holistic solution. The future looks bright with a possible blend or amalgamation of both seamless and secure transactions across borders.

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Exploring the Foundation of Modern Banking: 9 Essential Core Banking Modules for Comprehensive Insight

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Core Banking Systems (CBS) are the bedrock of modern financial institutions (FIs), serving as the linchpin for delivering accessible, flexible, and scalable banking services. With FIs allocating significant investments towards upgrading their legacy CBS, it’s paramount to grasp the pivotal modules embedded within these systems to maximize their capabilities. Recent industry data underscores the critical role of CBS in shaping the banking landscape. According to a report by BankingTech, investments in CBS upgrades have surged by 25% over the past two years, reflecting the industry’s commitment to modernization and innovation. This substantial increase underscores the growing importance of understanding the core modules that drive CBS functionality. As financial institutions navigate the complex terrain of modern banking, insights from a study conducted by Deloitte reveal that institutions leveraging comprehensive CBS solutions witness up to 30% improvement in operational efficiency and a 20% increase in customer satisfaction. These statistics underscore the transformative impact of CBS modules on enhancing banking operations and customer experiences. In light of these trends, delving into the intricacies of CBS modules becomes imperative for financial professionals seeking to stay ahead in the competitive landscape. By gaining a deeper understanding of these modules, banks can unlock new opportunities for innovation, efficiency, and customer-centricity, driving sustainable growth and success in the digital era. Let’s delve into the core modules that underpin the functionality of modern Core Banking Systems: Payment Processing Module: · Precision and efficiency characterize the Payment Processing module, managing diverse transactions with finesse. · According to recent industry reports, the adoption of contactless payments has witnessed a staggering growth of over 40% globally in the past year alone, emphasizing the critical role of payment processing modules in facilitating seamless transactions. Customer Relationship Management (CRM) Module: · Personalization takes center stage with the CRM module, enriching user interactions beyond mere data storage. · Recent data suggests that banks utilizing advanced CRM capabilities experience up to a 20% increase in customer satisfaction and retention rates, highlighting the significance of personalized experiences in today’s competitive landscape. General Ledger Module: · The General Ledger (GL) Module serves as the centralized repository for recording all financial transactions systematically. · Studies indicate that organizations leveraging advanced GL modules witness up to 30% improvement in financial reporting accuracy, enabling informed decision-making and regulatory compliance. LMS and LOS Module: · The Loan Management System (LMS) and Loan Origination System (LOS) streamline the loan lifecycle, from application to repayment. · Recent market analysis indicates that FIs adopting comprehensive LMS and LOS solutions achieve up to a 25% reduction in loan processing time, enhancing operational efficiency and customer satisfaction. Digital Banking Module: · The Digital Banking Module revolutionizes customer interactions by offering seamless online and mobile banking experiences. · Recent market analysis indicates that banks embracing digital banking solutions witness up to a 25% increase in customer engagement and retention rates, as customers increasingly prefer digital channels for their banking needs. Data Analytics Module: · The Data Analytics Module harnesses the power of data to drive informed decision-making and personalized customer experiences. · According to industry insights, organizations leveraging advanced data analytics modules experience up to a 30% improvement in cross-selling effectiveness and revenue generation, as data-driven insights enable targeted product recommendations and marketing campaigns. Fraud Detection Module: · Proactive fraud prevention defines the Fraud Detection Module, leveraging data analytics and machine learning to identify suspicious behaviour. · According to industry research, organizations with robust fraud detection systems experience up to a 40% decrease in fraud-related losses, safeguarding both financial assets and customer trust. Expense Management Module: · Methodical oversight characterizes the Expense Management Module, ensuring strict adherence to budgets and optimal resource utilization. · Recent surveys indicate that businesses implementing advanced expense management solutions witness up to a 35% reduction in administrative costs, driving bottom-line savings and operational efficiency. Tax Module: · Automated tax management simplifies tax-related responsibilities for FIs and customers alike, ensuring financial integrity from income to corporate taxes. · Market trends reveal that organizations leveraging integrated tax modules achieve up to a 30% reduction in tax compliance costs, streamlining processes and mitigating risks. These core banking modules operate seamlessly behind the scenes, ensuring a smooth and secure banking experience for customers. As FIs embrace the evolution of their legacy systems, the integration of these modules not only streamlines transactions but also enhances customer experiences, fortifies security measures, and drives operational excellence. Curious to learn more about Core Banking Systems and their transformative impact? Stay tuned for deeper insights and innovative solutions! You can also visit www.wibmo.com Banking Platform, Banking Tech, Banking Technology, Core Banking Solutions, Modern Banking

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Wibmo Protect — Adaptive Multi-Factor Authentication Solution

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The Reserve Bank of India (RBI) has embarked on a transformative journey by proposing a Principle-Based Framework for the authentication of digital transactions. This pioneering initiative underscores the RBI’s commitment to fostering a secure, seamless, and customer-centric digital payments ecosystem. The primary objective of this framework is to propel the adoption of alternative authentication mechanisms, transcending the traditional SMS OTP paradigm. By embracing innovative authentication solutions, the RBI seeks to elevate the customer experience while fortifying the security infrastructure of digital payments. Furthermore, this strategic move is poised to empower businesses to embark on a journey of innovation, enabling them to explore cutting-edge solutions while upholding the highest standards of security and integrity. In essence, the Principle-Based Authentication Framework heralds a new era of digital transactions, characterized by enhanced security, heightened user experience, and unparalleled innovation. Challenges with OTP Authentication: Traditional SMS OTPs, while prevalent, present significant limitations and risks. They heavily rely on mobile service providers, are susceptible to interception, and contribute to transaction delays and failures, leading to user frustration and financial losses. Limitations of Traditional SMS-Based OTP Authentication: – Reliance on Mobile Service Providers: SMS OTPs are entirely dependent on mobile service providers, making them susceptible to network coverage issues and unable to support offline mode. – Inadequate Support for Cross-Border Transactions: Due to network dependencies, SMS OTPs face challenges in facilitating cross-border transactions and international access. – High Transaction Authentication Failure Rate: In the current scenario, the authentication failure rate for card transactions using SMS OTPs averages between 5% to 8%, primarily due to network dependencies. – Vulnerability to Cyber Threats: SMS OTPs are prone to interception, phishing, MITM attacks, and sim swapping, lacking robust protection for authorized access. – Rising Instances of Fraud: Cybercrimes, including fraud cases involving SMS OTPs, have surged, with approximately 1.1 million fraud cases registered in 2023, amounting to Rs 7,488.6 crore. Additionally, UPI fraud cases reached over 95,000 in the 2022–23 fiscal year. – User Experience Disruptions: Delays or delivery failures in SMS OTPs disrupt the user experience, leading to frustration and contributing to merchant conversion losses. – Increased Operational Costs: Constant intervention is required to manage authentication experiences across various channels, leading to additional costs. The average SMS cost per transaction is 12 paise, which escalates based on the chosen channels. Wibmo Protect: A Revolutionary Solution: Wibmo Protect, a cutting-edge platform, aligns seamlessly with the RBI’s framework. Utilizing a risk-based contextual authentication approach, it leverages machine learning and deep data analytics to detect and prevent fraudulent transactions in real-time. Contextual authentication further enhances security, enabling swift and secure payments without OTPs. Key Benefits of Wibmo Protect: Wibmo Protect offers a multitude of benefits, including: – Fraud Detection & Prevention – Dynamic Risk-based Authentication – Preference-based authentication with multiple modes – Multi-channel support for various transaction types – Reduced chargebacks and increased revenue growth – Merchant opt-out feature – Enhanced consumer authentication experience Wibmo Protect combines three powerful modules: 1. Access Control Server (Accosa ACS): A holistic payment authentication platform integrated with an intelligent risk engine. 2. Enterprise Trident FRM: A comprehensive cross-channel, self-learning risk assessment engine. 3. Tridentity: A multifactor out-of-band authentication solution offering secure, password less authentication. Wibmo Protect emerges as a game-changer in digital transaction security. By embracing innovative technologies and adaptive authentication methods, it sets new standards for security, efficiency, and customer satisfaction. With its comprehensive suite of modules, Wibmo Protect stands as a beacon of trust and reliability in the evolving landscape of digital transactions. Through continuous innovation and commitment to security, Wibmo paves the way for a secure and seamless digital future. Author: Anand K Khanna, Product Manager — Fraud & Risk Management Wibmo A PayU/Naspers FinTech Company Digital Payment, Fraud Detection, Multi-Factor Authentication, Payment Security, RBI

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Unveiling the Future: Fintech Innovations Redefining Finance in 2024

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As we navigate the intricate landscape of finance, the year 2024 unfolds with a myriad of fintech innovations that promise to reshape the industry fundamentally. Fintech, a portmanteau of “financial technology,” has become synonymous with innovation and disruption, revolutionizing how we manage, invest, and transact in the digital era. In this comprehensive blog, we’ll explore the groundbreaking fintech trends that are set to dominate the stage in 2024. Decentralized Finance (DeFi): Decentralized Finance, or DeFi, stands at the forefront of fintech innovation in 2024. This paradigm shift involves leveraging blockchain technology to create a decentralized financial ecosystem that operates outside traditional banking systems. DeFi platforms facilitate peer-to-peer lending, borrowing, and trading without the need for intermediaries. Smart contracts on blockchain networks ensure transparency, security, and efficiency in financial transactions. As we move forward, the DeFi space is expected to mature, offering more sophisticated financial services while challenging the conventional norms of the finance industry. Central Bank Digital Currencies (CBDCs): Central Bank Digital Currencies are gaining prominence as central banks worldwide explore the digitization of national currencies. In 2024, CBDCs are not just theoretical concepts but tangible initiatives that aim to provide a secure and regulated digital alternative to physical cash. Countries like China have made significant strides in piloting CBDCs, aiming to enhance the efficiency of financial transactions, reduce costs, and ensure greater financial inclusion. The widespread adoption of CBDCs holds the potential to redefine the global monetary landscape. AI-Powered Personalization: Artificial Intelligence (AI) continues to be a driving force in fintech, particularly in the realm of personalization. In 2024, AI is set to transform the user experience by providing hyper-personalized financial services. Machine learning algorithms analyze vast datasets to understand user behaviors, preferences, and financial patterns. Fintech platforms leverage this data to offer tailored investment advice, customized budgeting tools, and personalized recommendations. AI-driven personalization not only enhances user satisfaction but also fosters a deeper connection between users and their financial platforms. Embedded Finance: Embedded finance is revolutionizing the way financial services are delivered by seamlessly integrating them into non-financial platforms. In 2024, we witness the expansion of embedded finance into various sectors, allowing users to access financial services without the need to switch between different applications. E-commerce websites, social media platforms, and even ride-sharing apps now offer embedded financial services such as payments, loans, and investments. This trend is breaking down traditional silos, creating a more interconnected digital ecosystem. Green Fintech: Sustainability takes center stage in 2024, and fintech is not exempt from this global shift towards environmental responsibility. Green fintech initiatives are emerging to address climate concerns and promote eco-friendly financial practices. This includes the development of digital currencies with lower carbon footprints, sustainable investment platforms that prioritize environmental, social, and governance (ESG) factors, and tools that encourage responsible spending and consumption. Fintech is becoming a driving force for positive environmental change, aligning financial activities with broader sustainability goals. Biometric Authentication: The quest for enhanced security in financial transactions has led to the widespread adoption of biometric authentication methods. In 2024, we see a surge in the use of biometrics, such as facial recognition, fingerprint scans, and voice recognition, to verify user identities. These advanced authentication methods provide an extra layer of security against fraud and unauthorized access. As fintech platforms prioritize user safety, biometric authentication is becoming integral to ensuring secure and convenient financial transactions. The year 2024 marks an important turning point in the growth of fintech when creativity and technology combine to reshape the financial environment. From the decentralized revolution of DeFi to the digitization of national currencies via CBDCs, the fintech industry is undergoing transformational change. AI-powered personalization, embedded finance, green fintech efforts, and biometric authentication all work towards a future in which financial services are not just technologically advanced but also sustainable, secure, and seamlessly interwoven into our daily lives. As we welcome the advancements in fintech, it’s crucial to acknowledge their profound impact on money management. Heading into 2024, the future of financial technology promises ongoing empowerment, bridging financial divides, and fostering a more inclusive and sustainable global economy. Leading this transformative journey is Wibmo, a key player in fintech, utilizing innovative technologies. With our robust payment security and digital payment services, we play a pivotal role in seamlessly integrating financial services, ensuring heightened security and transaction efficiency. In this era of significant shifts in the financial industry, we are happy to be able help banks and fintech firms in reshaping the landscape of finance. 2024 Trends, 2024 Trens, Digital Finance, Financial Services, Fintech, Fintech Trend

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Empowering Digital Transactions: A Comprehensive Guide to Payment Gateways and Wibmo Areion’s Innovation

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The dynamic landscape of digital payments has posed challenges and opportunities for stakeholders across the financial ecosystem. From merchants and payment facilitators to issuers and payment gateways, each entity grapples with considerations of customer convenience, operational costs, compliance, security, and value-added services. This comprehensive guide explores the critical decision of selecting the right payment gateway, emphasizing the importance of compliance, security, transparent costing, and value-added services. Additionally, we delve into the innovative features of Wibmo Areion, a cutting-edge payment gateway that redefines the digital payment experience. Understanding the Landscape: The payment ecosystem operates as a connected network of platforms, where the considerations for selecting a payment gateway vary based on the role of the player. The two primary providers of payment gateway services to merchants are acquiring banks or intermediaries such as Payment Aggregators, Payment Facilitators, or PSPs. Table Stakes and Prerequisites: Before embarking on the payment gateway journey, certain prerequisites must be addressed. Compliance with supported payment schemes and robust technological infrastructure, complying with standards like PCI DSS and NPCI for UPI, is crucial for a seamless and secure digital payment experience. Key Business Considerations: Cost per Transaction (MDR): Derived from the Merchant Discount Rate (MDR), transparent costing is complex and varies based on factors like merchant category code, payment limit, and payment instrument type. Transaction Success Rate (SR): Paramount for all stakeholders, payment gateways strive to offer the highest success rate through innovative payment flows and partnerships. Fraud Management: A robust fraud management platform is essential to minimize chargebacks and secure payments, especially in online transactions. Billing, Reporting, and Dashboards: Transparent billing and reporting are crucial for stakeholders to gain clear insights into transactions through simple and informative dashboards. Differentiators and Value-Added Services: Beyond core capabilities, payment gateways seek to differentiate themselves through value-added services: Frictionless Check-Out: Using biometrics for seamless authentication. Loyalty Programs: Allowing customers to earn and redeem loyalty points at checkout. EMI Options: Providing affordable instalment options at checkout. Diverse Payment Methods: Supporting additional payment methods such as wallets, net banking, and local payment methods. Unveiling the Future: Exploring Wibmo Areion Payment Gateway In the rapidly evolving landscape of digital payments, having a robust and versatile payment gateway is crucial for businesses seeking seamless transactions and enhanced customer experiences. Wibmo, a leading player in the fintech industry, introduces its cutting-edge payment gateway — Wibmo Areion. Let’s delve into the features, benefits, and potential impact of this innovative solution. The Rise of Wibmo Areion: Wibmo Areion represents a significant leap forward in the world of payment gateways, offering advanced features and capabilities designed to meet the dynamic needs of modern businesses. From security enhancements to a user-friendly interface, Wibmo Areion aims to redefine the digital payment experience. Key Features: Enhanced Security Protocols: Prioritizing transaction security with state-of-the-art protocols and compliance with PCI DSS standards. Seamless User Experience: Commitment to a smooth and seamless user experience for quick and hassle-free transactions. Adaptive Fraud Management: Employing adaptive fraud management tools to stay ahead of evolving fraud tactics and minimize chargebacks. Multi-Channel Support: Recognizing the diverse nature of modern transactions, Wibmo Areion offers support for various channels, including e-commerce, mobile payments, and in-app transactions. Flexible Integration Options: Providing businesses with flexible integration options through Rest-based APIs, ensuring a hassle-free implementation process. Benefits for Businesses: Enhanced Security: Instilling trust among customers by providing a secure and reliable payment environment. Improved Customer Experience: Contributing to an enhanced customer experience, leading to higher satisfaction and retention rates. Reduced Fraud-related Costs: Minimizing the financial impact of fraudulent activities, reducing operational compliance costs. Scalability and Multi-Channel Reach: Scaling with businesses as they grow and ensuring support for various platforms and channels. Efficient Integration: The flexible integration options make the onboarding process smoother, allowing businesses to quickly adopt and benefit from advanced features. The selection of a payment gateway is a nuanced decision that traverses various dimensions based on the role of the payment player. As stakeholders navigate this landscape, the emphasis on compliance, security, transparent costing, and value-added services will play a pivotal role in shaping the future of digital transactions. Let us work together and ensure that we, as one family, soar to new heights in the coming year. None of this would have been possible without each one of you. Your dedication and hard work have been the driving force behind our success. As we bid farewell to this incredible year, we express our deepest gratitude. We look forward to seeing you grow with us in the coming years. Author: Ravi Battula, Vice President- Merchant Acquiring Business Wibmo A PayU/Naspers FinTech Company Card Payment, Online Payments, Payment Gateway, Payment Processing, Payments Technology

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UPI Fraud Trends and Their Possible Mitigation

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With over 2 billion transactions worth over INR 4.5 trillion processed every month, India’s United Payment Interface (UPI) has revolutionized the digital payment ecosystem. UPI has been emerging as the most preferred payment method among Indians. However, at the same time, we are witnessing a rise in fraudulent transactions in recent times. A total of 1,46,495 unified payments interface (UPI) fraudulent activities were reported on the National Cybercrime Reporting Portal (NCRP) during the first and second quarters of 2022, as per the Ministry of Home Affairs (MHA). Up until now, banks and financial institutions have predominantly relied on educating consumers against fraud. But, in cases of fraud, the consumer is at the mercy of the grievance process, which adversely affects the consumer experience and dents customer loyalty. Fraud Trends and Their Possible Mitigation Impersonating Sellers and Customer Care It is more of a habit to google customer care contacts when facing issues with our online purchases. Fraudsters are flooding the internet with fake customer care details to lure in consumers. After gaining the trust of gullible customers over the phone, refund collect requests are shared via QR codes, SMS links, and so on. Financial institutions can integrate with technological solutions that detect and alert the customer in the event that a payment is made over the phone. Spoofed VPA IDs In the name of disaster relief or support, fraudsters created multiple spoofed VPA IDs that are remarkably similar to the original ones. In recent times, we witnessed an unprecedented rise in VPA IDs, similar to the PM Cares Fund. Maintaining a list of suspicious keywords such as support, relief, care, disaster, army, minister,” etc. and running risk rules over transactions being made to VPA IDs containing high-risk keywords have the potential to curb fraudulent transactions. Screen mirroring apps and malware Through malicious links, fraudsters get consumers to download screen-sharing or remote-access apps or malware. Once installed, the fraudster gains access to confidential UPI details, which are then used in combination with other modus operandi, such as SIM-swapping. Payment apps should have the capability to detect potential malicious apps already downloaded on the device and restrict payments from going through. Collect Request Through classified ads, fraudsters initiate conversation with sellers they are impersonating as potential buyers. Creating a sense of urgency, the fraudster intends to make a quick payment without much negotiation and sends a collect request, sometimes in the form of a QR code. The VPA IDs used by fraudsters are generally gibberish and at times have numbers or alphabets in sequence. Banks or financial institutions’ apps should have the capability to detect such patterns on beneficiary VPA handles. UPI has made digital payments more accessible and convenient for millions of people in India, and it is expected to continue to play a significant role in India’s digital payments ecosystem in the coming years. With continued efforts of educating consumers against frauds, banks and financial institutions should leverage the technological advancements against the mushrooming UPI frauds. Author: Sujit Kumar Mahato, Product Manager Wibmo A PayU/Naspers FinTech Company BaaS

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Regulator asking your bank to migrate from SMS-based OTPs to more secure authentication options? Use the opportunity to derive multiple benefits

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Central Banks are proactively taking steps to reduce the risk of banking/financial fraud The phrase “two sides of the same coin” applies to the world of digital banking and financial services as well. Internet/mobile based banking capabilities have undoubtedly enabled convenience and speed for consumers and reduced costs for service providers. Simultaneously, however, there has also been a steady rise in digital frauds and scams around the world. New ways of scamming consumers are constantly emerging because omni-channel digital first banking has given perpetrators more options based on how banking transactions are authenticated. Central banks around the world have regularly been raising the bar for digital security within their jurisdictions, given their responsibility for orderly conduct of a country’s banking and financial services system and ensuring the highest levels of consumer safety and protection. Individual banks and fintech players are proactively integrating new technologies and protocols to provide customers with the additional security of multi-factor authentication. About a month ago, Bank Negara Malaysia (BNM, the Malaysian central bank) announced that banks operating in that country needed to adopt authentication methods for online activities (opening accounts, making payments and other transactions) that go beyond SMS-based OTPs (One Time Passwords). BNM’s new measures also cover changes to default customer account settings, cooling off periods for new accounts, using just one device for authentication, etc. The rules pertaining to the detection of scams/frauds and the triggering of blocking actions are also being tightened. While many of the steps will kick in after suspicious transactions are detected, what is essential for banks is to strengthen measures that can minimize the occurrence of frauds and scams through superior digital authentication and the detection of risky transactions. OTPs and two-factor authentication are no longer adequate Over the past years, OTPs have become ubiquitous and deeply embedded in our lives as the primary means to authenticate all banking (and many other) transactions. But the two-factor authentication provided by OTPs is no longer enough to provide customers with the desired levels of safety and protection. Authentication is based on entering the 4 or 6 digits sent by the service provider to the customer’s mobile number. It does not verify the identity of the person who has entered the OTP. This means anyone with access to the OTP can easily impersonate a customer and complete transactions without the genuine customer being aware until it is too late. Think about three commonplace scenarios that customers might routinely face: a lost or stolen mobile phone, an unlocked phone on their office desk while they briefly step out, or a phone given for repairs (where unscrupulous staff members have the chance to copy/access personal data). In each of these situations, unauthorized persons can easily access OTPs and other transaction-related messages sent by banks to the phone and essentially “authenticate” transactions that will go through as legitimate transactions initiated/approved by you. If such impersonation risks are not bad enough, think about phishing frauds and scams where users are induced to click on links that they believe have come from their bank or other service providers via SMS. A world of non-banking digital payment apps and platforms gives fraudsters even more opportunities to scam customers by voluntarily giving out information that is needed to complete unauthorized financial transactions. In such a high-risk environment, online authentication must necessarily be made a more rigorous and fool-proof process that is inherently harder to circumvent. Rather than relying on an OTP that can be entered by anyone (and not just the genuine customer), banks must adopt authentication protocols that use multiple data points that can be collectively used to establish customer identity and authenticity of transactions. Multi-factor authentication can make a big difference to the reliability of your authentication and hence customer experience Banks need to balance secure and reliable authentication with the associated costs and impact on customer experience. Working even when there is mobile network latency (or lack of network coverage) is another requirement. Compliance with the bank’s own security norms and complete adherence to prevailing regulatory requirements also needs to be considered. The solution must be such that it can be used seamlessly with mobile banking as well as internet banking. Multi-factor authentication (MFA) solutions tick all these boxes. A robust MFA solution uses a combination of three distinct sets of data points for authentication: · Knowledge- what the customer knows (e.g., password, security question); · Ownership/access- what the user has (e.g., mobile device, USB token); and · Inherence- something that is inherent to the customer (e.g., fingerprint or other biometrics) A world-class MFA solution must provide banks (and other organizations) the option to authenticate customers and transactions based on a variety of authentication touchpoints that cater to customer preferences and risk profiles. It must be used either on a standalone basis or be capable of easily being integrated with a bank’s existing assets. It must support Out of Band (OOB) authentication- which means that the channel used for authentication must be distinct from the one used to sign in or perform a transaction. Ideally, the OOB authentication element must reside in the customer’s registered mobile phone, making it easier to leverage ownership- and inherence-based data points as well for authentication. The MFA solution must be compatible with EMV 3-D Secure and 3-D Secure 1.0 protocols and support CNP transactions as well. Wibmo’s Tridentity is an MFA solution that is designed to address the above needs and deliver the above capabilities. It supports authentication based on Push notifications, Offline OTP, and Biometrics. It is available as a simple SDK or downloadable as an Android/iOS app. Tridentity is compliant with the EU’s PSD2 initiative. Please click on https://www.wibmo.com/tridentity/ for more information on Wibmo’s Tridentity solution and how it can help your bank in Malaysia or elsewhere. If you have specific questions and would like to speak to one of our experts, write to us at [email protected]. Author: Edward Chien, Director- Sales, South-East Asia Wibmo A PayU/Naspers FinTech Company Authentication, Multi-Factor Authentication, Online Payments, Out of

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Moving beyond SMS OTP Authentication

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If you have ever transacted or purchased online, you must have come across the OTP Authentication. The system-generated code delivered through SMS on your device serves as a verification of the claim that you are the actual owner of the device as well as the account/card/wallet through which the transaction is initiated. The authentication or verification of our identity as who we claim ourselves to be is a part of our day-to-day lives. Be it checking in at the airport or going past the security desk of an office, though we identify ourselves with our name, we authenticate ourselves with some other form of ID card. With growing security concerns, both in the physical and digital worlds, authentication methods have evolved not only to protect but also to provide a seamless experience to users. The ways in which one can be authenticated fall into three categories: · Knowledge: Something the user knows (eg. Password) · Ownership: Something the user has (eg. ID card) · Inherence: Something the user is (eg. Fingerprint) The above categories are referred as the Authentication Factors and the use of the number of factors in an authentication process derives its name. · Single-factor Authentication: Requires providing only one piece of verifiable information such as a password · Two-factor Authentication(2FA): Requires providing two pieces of verifiable information such as a password and then proof of possession of their smartphone (through an SMS OTP delivered on that device) · Multi-factor Authentication: Required to provide two or more pieces of verifiable information. As in the case of 2FA, where two categories (factors) of information are required, it is also considered an MFA. The idea of an OTP was first suggested in the 1980s by Leslie Lamport. With growing attacks and increasing authentication requirements, many patented OTP algorithms were developed. Today, OTPs are synonymous with two-factor authentication and are thought to augment existing passwords with an extra layer of security. Yet, fraudsters manage to circumvent it every day. SIM SWAP: In this scenario, a fraudster uses the stolen identity (name, email, government ID, etc.) to trick a mobile service provider into issuing a new SIM card for an existing phone number. Once the new SIM card is active, the original SIM card will be shut down, and the fraudster will try to gain access to the user’s financial application. Once the fraudster has gained access, the last line of defense—2FA or SMS OTP, is compromised. JAILBREAK or ROOT: Removing software restrictions put in place by manufacturers, to gain full access to the device’s operating system is called “jailbreaking” for iOS and “rooting” for the Android operating system. Generally, it is aimed at customizing the user experience or gaining access to a greater variety of unofficial apps. Jailbroken and rooted devices are susceptible to malware and viruses due to the weakened built-in security features of the devices. This eliminates security controls made by the manufacturer, which enables hackers to steal personal information, attack the network, or introduce malware, spyware, or viruses to circumvent the authentication measures in place. Investigating the feasibility of implementing a code by financial institutions that checks if the device is rooted or jailbroken prior to the installation of the mobile application and disallows the mobile application to install or function if the phone is rooted or jailbroken, can save its customers from possible fraud. Increasing layers of security is not a feasible solution for financial institutions when consumers prefer speed and convenience, even when it comes to accessing financial services online. User experience has become one of the determining factors when it comes to user adoption in any industry globally. Not receiving an SMS OTP, is one of the most painful experiences one can have as a user. Latency, in addition to the SMS cost, is a challenge for financial institutions in the exponentially growing digital era. Maintaining a balance between fighting fraud and improving the consumer experience is a challenge. Leveraging inherence-based authentication, such as biometrics, or ownership-based authentication, such as push notifications on the registered device, are some of the authentication measures that cater to both security and the consumer experience. Technological solutions with multiple authentication measures other than SMS OTPs and device binding are the way forward for providing a delightful customer experience without compromising security. Author: Sujit Kumar Mahato, Product Manager Wibmo A PayU/Naspers FinTech Company Authentication, Fraud Prevention, Global Digital Payments, Payments

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Importance of Fraud and Risk Management Solutions for Financial Institutions

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Technology and trust must go hand in hand Technologies are undoubtedly transformative for businesses and their customers. But to fully deliver the promised benefits, technologies must consciously build trust amongst all legitimate users and stakeholders. Trustworthiness is becoming critical by the day in an increasingly digital world because of the rising incidence of online fraud. Just as quality at the source is a mantra for manufacturing companies, the detection, and prevention of fraudulent transactions as soon as they originate is important for banks and financial institutions. At the same time, customer convenience has to be balanced out. Regulators expect banks to enhance their digital abilities to detect/prevent frauds/crimes Regulators play a key role in ensuring the safe, smooth, and efficient functioning of the banking and financial systems within their individual jurisdictions. As such, central banks worldwide have begun to tighten various regulatory requirements in order to reduce the risk of fraud made possible by technological or process loopholes in the systems used by banks and other financial institutions. In March 2022, the Bangko Sentral NG Pilipinas (“BSP”, the central bank of the Philippines), published amendments to its “Regulations on Information Technology Risk Management” with the specific objective of enhancing customer protection. To ensure that digital banking channels are made safer and more reliable, the BSP requires banks operating in the Philippines to implement automated and real-time fraud monitoring and detection systems capable of identifying and blocking suspicious or fraudulent online transactions. Starting 1 September 2022, banks must be prepared to show BSP their action plans; and full compliance with a readiness plan is expected by 31 December 2022. While the Fraud Management systems implemented must commensurate with the bank’s operations and the scope of its digital platforms, BSP does expect that the solutions that banks put in place will, at a minimum, deliver the following capabilities: · Monitoring, collecting, and analyzing transaction data arising from all physical and digital banking and non-banking channels; · Integration with the bank’s Anti Money Laundering (AML) systems to provide a more robust and comprehensive mechanism to prevent financial crimes (and not just detect them); · Building customer profiles and analyzing behavior to detect frauds based on changes in usage patterns; and · Secure scalability to handle growing transaction volumes. FRM solutions must give robust Fraud detection and prevention capabilities without damaging customer relationships Frauds and other operational risks not only damage customer confidence in individual banks (and the banking system as a whole) but can also lead to financial losses (reparations, penalties) and harm your brand/reputation. Clearly, the costs of not having a state-of-the-art Fraud & Risk Management System (FRMS) are high. While there are many FRMS solutions out there, not all of them are equally efficacious. This is because each one uses different protocols to detect and analyze risks and thereafter, determine further courses of action. Wibmo’s Trident FRM platform offers multiple advantages Wibmo’s Trident is an enterprise fraud and risk management platform that uses advanced authentication protocols and ML-driven statistical models. Our platform makes approval/ challenge/ decline decisions based on rigorous, real-time assessment of more than 100 parameters related to the device, user, and transaction (e.g., merchant, location, IP address, time of the transaction, value, etc.). This Risk-Based Authentication (RBA) approach provides a more robust and reliable assessment of the risk of every individual transaction. The omnichannel capability of the platform is an added advantage wherein the bank’s operations team gets a central view of their customer’s transactions across channels For banks operating in the Philippines, Trident can ensure full compliance with BSP’s amended regulations within the stipulated timeframe. However, irrespective of where your bank operates, there are many other reasons why Trident could be the right FRMS solution for your bank: · Many banks rely on disparate legacy systems and point solutions for specific functions (e.g., AML, branch-based KYC transactions, etc.). Integrating data from myriad systems is neither easy nor efficient; the chain is only as strong as the weakest link. Therefore, our risk management platform is API-driven. What is more, it uses 360o degree customer data and insights to detect anomalous behaviors that might indicate fraud or misuse. · Trident is sensitive to the need for banks to deliver a seamless, speedy, and superior customer experience for every legitimate transaction; this minimizes customer friction– key to building loyalty and enhancing lifetime value. · Customers (and fraudsters) can use multiple channels to effect transactions (e.g., 3DS, mobile payment, ATM/POS, online retail/corporate banking). The FRMS solution your bank adopts must be able to function equally effectively- and seamlessly- across channels (to handle situations where customers legitimately switch channels). Our platform uses AI/ML to safeguard customers, merchants, card issuers, and networks in an omnichannel environment. Sometimes, frauds are perpetrated at the merchant level (e.g., by employees misusing customer cards for fraudulent transactions). The Trident platform can detect and prevent such misuse as well. Trident enables full compliance with FATF and AML-CFT, thus helping to prevent financial crimes. · Your bank works with various card networks (Visa, MasterCard, American Express, etc.). Trident is compatible with all networks; it gives you get a network-agnostic RBA score thus strengthening your bank’s overall ability to detect, prevent and manage fraud risks. · Trident can be fully deployed on Cloud, thus assuring high availability and scalability so that 100% of your bank’s transactions are processed in real-time to validate the authenticity and assess risk before completion. · Our FRMS platforms are rules-driven. This lets your bank respond quickly to emerging threats with the help of “quick rules” and “expression rules” for more complex threat scenarios. The bank will also be equipped with Rule Wizard wherein the operations team can build rules on the fly · Quick investigation and resolution of transactions are important to ensure customer satisfaction, and regulatory reporting/compliance as well as enhancing the bank’s preparedness to prevent future false positives. Efficient and workflow-driven case management capabilities built into our platform allow investigators to track, investigate and resolve transactions quickly. This also reduces your bank’s operational expenses– a major benefit gave the pressure on margins. · Banks that adopt

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