Navigating the Turbulent Waters of Modern Core Banking

The UPI Revolution: Navigating the Waters of Digital Fraud

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/marketing-cms/m2p-blog/2026/05/compliance-didnt-ask-for-it_blog_v1_2_2000x1000.webp" alt="Compliance Didn’t Ask for It — But Regulators Now Expect Smarter Risk Systems" title="" id="vbybj9xgo" width="100%" height="362">The ground is shifting beneath the feet of compliance officers. For years, the mantra was "follow the process". A meticulously documented, consistently applied compliance process was the shield against regulatory scrutiny. But that shield is proving increasingly ineffective against today's sophisticated threats.&nbsp;Regulators, grappling with a surge in financial crime, are now operating under a new, unspoken assumption, that regulated entities are leveraging advanced technology to manage risk. The focus is shifting from procedural diligence to demonstrable outcomes. This is a quiet but profound revolution, and firms that fail to adapt will find themselves exposed.&nbsp;<h2 class="heading-node" id="fi35u0ttk" style="text-align: left">From Procedural to Outcome-Based Oversight&nbsp;</h2>The era of "tick-the-box" compliance is over. Regulators are less interested in how you follow a process and more interested in the result. Are you effectively preventing money laundering? Are you protecting your customers from fraud in real-time? These are the questions that matter, and a paper-based, manual framework cannot provide satisfactory answers.&nbsp;The scale of the problem is staggering. In India, the banking sector recorded <a class="link" href="https://rmaindia.org/bank-fraud-losses-surge-to-%E2%82%B936014-cr-despite-drop-in-cases-rbi/" target="_blank">fraud-related losses of ₹36,014 crore</a> in FY 2024–25, a steep 194% surge from the previous year. In response, the Reserve Bank of India (RBI) has explicitly called on financial institutions to adopt advanced fraud-detection systems powered by artificial intelligence and machine learning to strengthen security. The message is clear, the expectation has been set.&nbsp;<h4 class="heading-node" id="a4tq9czyf" style="text-align: left">"We Followed the Process" is no longer Defensible</h4>Claiming you "followed the process" after a significant compliance failure is like saying you were looking at the map while driving into a ditch. In this new environment, it’s a defense that is unlikely to garner much sympathy.&nbsp;Financial crime has become a high-tech enterprise. Fraudsters use deep-fake voice scams, synthetic identities, and automated account takeovers that bypass traditional, rule-based defenses. Legacy systems are simply not equipped to handle the speed, volume, and complexity of modern threats. They suffer from fragmented data, slow response times, and an unacceptably high rate of false positives, which damages the customer experience.&nbsp;<h2 class="heading-node" id="n3hw5wfrr" style="text-align: left">The Rise of Tech-Enabled Audits and Model Governance&nbsp;</h2>This new regulatory expectation is also changing the nature of audits. Tech-enabled audits are rapidly becoming the norm, with regulators using AI to analyze entire datasets for anomalies. As firms adopt their own advanced technologies, a new area of focus is emerging: model governance. If you are using an AI model to make risk decisions, you must be able to explain how it works, prove its accuracy, and ensure it is free from bias.&nbsp;<h2 class="heading-node" id="hc0sq9dpt" style="text-align: left">M2P's FRM: Your Regulatory Insurance in a Tech-Driven World&nbsp;</h2>Navigating this new landscape requires a strategic shift from reactive defense to proactive, intelligent risk management. This is where M2P's <a class="link" href="https://m2pfintech.com/blog/how-m2ps-ai-powered-fraud-risk-monitoring-frm-is-transforming-fraud-detection-for-financial-institutions/" target="">AI-powered Fraud and Risk Management (FRM)</a> solution comes in. It's not just a compliance tool; it's the regulatory insurance your institution needs to thrive in the digital age.&nbsp;M2P’s FRM platform is built to address the core challenges financial institutions face today, aligning perfectly with the new regulatory expectations.&nbsp;<table class="border-collapse border border-gray-300" style="min-width: 50px"><colgroup><col style="min-width: 25px"><col style="min-width: 25px"></colgroup><tbody><tr class="border border-gray-300"><td class="border border-gray-300 p-2" colspan="1" rowspan="1">Challenge&nbsp;</td><td class="border border-gray-300 p-2" colspan="1" rowspan="1">How M2P's FRM Provides the Solution&nbsp;</td></tr><tr class="border border-gray-300"><td class="border border-gray-300 p-2" colspan="1" rowspan="1">Fragmented Systems &amp; Data Silos&nbsp;</td><td class="border border-gray-300 p-2" colspan="1" rowspan="1">Our platform unifies fraud detection across all channels—including cards, UPI, BNPL, and core banking—to create a single source of truth for risk insights. This eliminates the gaps fraudsters exploit between disparate systems.&nbsp;</td></tr><tr class="border border-gray-300"><td class="border border-gray-300 p-2" colspan="1" rowspan="1">Slow, Reactive Detection&nbsp;</td><td class="border border-gray-300 p-2" colspan="1" rowspan="1">In a world where milliseconds matter, our FRM enables sub-400 millisecond response times. It uses advanced machine learning to apply risk assessments and detect anomalies in real-time, before a fraudulent transaction completes.&nbsp;</td></tr><tr class="border border-gray-300"><td class="border border-gray-300 p-2" colspan="1" rowspan="1">High False Positives &amp; Poor Customer Experience&nbsp;</td><td class="border border-gray-300 p-2" colspan="1" rowspan="1">Traditional systems generate high false-positive rates (sometimes up to 40%), frustrating legitimate customers. Our AI/ML models achieve an average detection accuracy of 96.4% and reduce false positives to just 5.2%, ensuring genuine customers have a frictionless experience.&nbsp;</td></tr><tr class="border border-gray-300"><td class="border border-gray-300 p-2" colspan="1" rowspan="1">Inflexible &amp; Slow Rule Management&nbsp;</td><td class="border border-gray-300 p-2" colspan="1" rowspan="1">Legacy systems require vendor dependency for rule changes. Our FRM empowers risk teams with a self-service Business Rules Engine (BRE), enabling them to design, test, and deploy new rules instantly without any coding.&nbsp;</td></tr><tr class="border border-gray-300"><td class="border border-gray-300 p-2" colspan="1" rowspan="1">Weak Authentication &amp; Manual Case Tracking&nbsp;</td><td class="border border-gray-300 p-2" colspan="1" rowspan="1">We strengthen security with Multi-Factor Authentication (MFA) and behavioral biometrics, analyzing patterns like typing cadence and mouse movements. Our integrated Case Management module automates tracking, allocation, and resolution workflows, providing full visibility and accountability.&nbsp;</td></tr><tr class="border border-gray-300"><td class="border border-gray-300 p-2" colspan="1" rowspan="1">Limited Insights &amp; Reporting&nbsp;</td><td class="border border-gray-300 p-2" colspan="1" rowspan="1">Our platform delivers actionable dashboards and comprehensive reports on fraud trends, rule performance, and operational metrics. This empowers your team to make data-backed decisions and prepare for audits with confidence.&nbsp;</td></tr></tbody></table> &nbsp;&nbsp;The message from regulators is unequivocal: the old ways of <a class="link" href="https://m2pfintech.com/blog/the-rising-threat-of-financial-fraud-why-robust-risk-management-is-essential/" target="_blank">managing risk</a> are no longer acceptable. In a world of increasingly sophisticated financial crime, leveraging advanced technology is not just an option; it's a fundamental requirement. By embracing a tech-driven approach, you can not only meet your regulatory obligations but also enhance operational efficiency, improve the customer experience, and protect your bottom line.&nbsp;Ready to future-proof your compliance and risk strategy?Explore <a class="link" href="https://m2pfintech.com/contact-us/?utm_source=blog&amp;utm_medium=web&amp;utm_campaign=frm" target="">M2P's Fraud and Risk Management (FRM)</a> solution today to turn your regulatory obligations into a competitive advantage.

Compliance Didn’t Ask for It — But Regulators Now Expect Smarter Risk Systems

The New Frontier of Fraud: How AI is Powering Scams at Scale and How to Fight Back

How M2P’s AI-powered Fraud Risk Monitoring (FRM) is Transforming Fraud Detection for Financial Institutions

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/marketing-cms/m2p-blog/2025/07/frm-blog-banner-04.webp" alt="M2P’s Advanced fraud risk management system for secure and trusted digital financial services." title="" id="lt7ml42w2" width="100%" height="253">Digital transformation has propelled financial services into a new era, offering speed, convenience, and global reach. But this progress brings a parallel surge in financial fraud, threatening the very foundation of trust and stability that underpins the industry.Understanding the Magnitude:&nbsp;<ul class="list-node" id="te5m7z0bz"><li>Illicit fund flows through the global financial system could reach an astonishing USD 4.5 to <a class="link" href="https://secretariat-intl.com/wp-content/uploads/2025/04/Secretariat-Global-Financial-and-Economic-Crime-Outlook-2025.pdf" target="">USD 6 trillion</a> by 2030</li></ul><ul class="list-node" id="kf4imf2r9"><li>AI-driven and deepfake fraud are set to drive a <a class="link" href="https://secretariat-intl.com/wp-content/uploads/2025/04/Secretariat-Global-Financial-and-Economic-Crime-Outlook-2025.pdf" target="">55–60%</a> increase in financial crime incidents by the end of 2025</li></ul><ul class="list-node" id="k9zhbrxoj"><li>Cyber-related fraud alone is expected to surpass <a class="link" href="https://secretariat-intl.com/wp-content/uploads/2025/04/Secretariat-Global-Financial-and-Economic-Crime-Outlook-2025.pdf" target="">USD 100 billion</a> by 2030</li></ul>To safeguard the future of finance, Fraud Risk Management (FRM) emerges as a strategic imperative, not just to combat fraud, but to redefine how we build trust in a digital world.Let’s explore the evolving fraud landscape and how FRM can lead us forward.<h2 class="heading-node" id="5dog23nkj" style="text-align: left">The Fraud Landscape: Key Threats Facing the Global Financial Ecosystem&nbsp;</h2>Financial fraud is evolving rapidly, with attackers leveraging sophisticated tactics and technologies. Among the most pressing threats are:&nbsp;<h3 class="heading-node" id="cxubxvksj" style="text-align: left">1. Identity Theft&nbsp;</h3>Fraudsters steal personal information, such as government IDs, bank credentials, or biometric data, to open accounts, make unauthorized transactions, or impersonate customers. The proliferation of large-scale data breaches and dark web marketplaces has made sensitive data more accessible to criminals than ever before.<h3 class="heading-node" id="1d6oulgjq" style="text-align: left">2. Payment Fraud&nbsp;</h3>Unauthorized transactions often stem from stolen credit/debit card details, hijacked payment accounts, or compromised digital wallets. Payment fraud can occur through card-not-present (CNP) transactions, card skimming, or account hacking.<h3 class="heading-node" id="lc8zuhxck" style="text-align: left">3. Account Takeover&nbsp;</h3>Cybercriminals gain unauthorized access to user accounts, often via phishing, credential stuffing, or social engineering. Once accounts are accessed, they can transfer funds, change account details, or commit further fraud.<h3 class="heading-node" id="plj4wyaqa" style="text-align: left">4. Investment Fraud&nbsp;</h3>Scammers present fake investment opportunities, often promising high, guaranteed returns to trick individuals or businesses into sending money. Ponzi schemes, pump-and-dump scams, and fraudulent ICOs are common examples.<h3 class="heading-node" id="bqw4rmmd0" style="text-align: left">5. Loan and Credit Fraud&nbsp;</h3>Fraudsters use fake or stolen information to obtain loans or credit, harming victims' credit and causing financial losses. This includes synthetic identity fraud and mortgage fraud, where applicants misrepresent income or property details to secure loans.<h3 class="heading-node" id="6cdw50btg" style="text-align: left">6. ACH Fraud&nbsp;</h3>Transactions on the Automated Clearing House (ACH) network are compromised by attackers using business email compromise (BEC) or forged payment instructions to divert funds from direct debits and credits.<h3 class="heading-node" id="ulv75dd2y" style="text-align: left">7. Phishing Scams&nbsp;</h3>Deceptive emails, texts, or calls trick individuals into revealing sensitive information, such as login credentials or payment details. Phishing remains one of the most common entry points for fraud.<h3 class="heading-node" id="cygf1e0dt" style="text-align: left">8. Synthetic Identity Fraud&nbsp;</h3>Fraudsters create entirely new identities using a mix of real and fake information, opening accounts and building credit before defaulting on loans or maxing out credit cards.<h3 class="heading-node" id="kak8m7yz1" style="text-align: left">9. Friendly Fraud&nbsp;</h3>Legitimate customers falsely dispute valid transactions, resulting in chargebacks and losses for merchants and financial institutions.<h3 class="heading-node" id="m70nsw8le" style="text-align: left">10. Internal Fraud&nbsp;</h3>Fraud committed by employees, including misappropriating funds, unauthorized transactions, manipulating records, or abusing access to confidential information, results in financial and reputational damage to organizations.This diverse and evolving threat landscape demands a unified, technology-driven response.&nbsp;<h2 class="heading-node" id="pecoaqt3a" style="text-align: left">A Vision for Global Financial Security: How M2P’s FRM Leads the Way&nbsp;</h2>M2P’s Fraud Risk Management (FRM) system is a comprehensive, cloud-native framework purpose-built to secure the global financial ecosystem. By seamlessly integrating advanced AI, regulatory intelligence, and user-centric design, M2P’s FRM empowers banks, fintechs, and NBFCs to stay ahead of threats, adapt faster, and protect customers with confidence.Here’s how M2P’s FRM is redefining fraud management in the digital era.<h3 class="heading-node" id="220oaozjd" style="text-align: left">1. Risk Management Expertise&nbsp;</h3>M2P embeds risk management expertise into every layer of its FRM solution. Designed to empower cross-functional teams, it equips stakeholders with intuitive, data-driven tools to proactively identify, assess, and mitigate risk long before escalation. From onboarding to servicing, every interaction is guided by embedded fraud resilience.<h3 class="heading-node" id="ifsxjisfn" style="text-align: left">2. Advanced Fraud Detection and Prevention&nbsp;</h3>M2P’s <a class="link" href="https://m2pfintech.com/blog/all-you-need-to-know-about-building-a-robust-fraud-and-risk-management-frm-system/" target="">FRM</a> combines robust rule engines with machine learning models to deliver real-time fraud detection and adaptive prevention strategies.<ul class="list-node" id="tdzusqjck"><li>Data Analysis and Anomaly Detection: Our platform continuously monitors transaction streams, using statistical models and machine learning to flag deviations from expected patterns, such as sudden large transfers or unusual spending spikes.</li></ul><ul class="list-node" id="w9oq99knz"><li>Behavioral Analytics: By tracking user behaviors like device usage, login locations, and transaction timing, the FRM system quickly identifies account takeovers and credential theft—critical in a world where <a class="link" href="https://coinlaw.io/online-banking-usage-statistics/" target="">3.6 billion</a> people use mobile banking.</li></ul><ul class="list-node" id="uk5nd1bkj"><li>Continuous Monitoring: Provides 24/7 surveillance of transactions and accounts, shrinking the window for fraudsters to act.</li></ul><h3 class="heading-node" id="w8n2jodle" style="text-align: left">3. Regulatory and Legal Compliance&nbsp;</h3>M2P simplifies regulatory complexity with baked-in compliance architecture that supports global and local frameworks like GDPR, PCI DSS, and AML/<a class="link" href="https://m2pfintech.com/kyc-suite/" target="">KYC</a>.<ul class="list-node" id="fwtxrmd4w"><li>eKYC &amp; AML Screening: Real-time identity verification and sanctions list screening to ensure compliance without friction.</li></ul><ul class="list-node" id="dwcqma5ki"><li>Automated Reporting &amp; Audit Trails: Every user action and transaction is logged, making it easier to meet audit requirements and manage incident traceability.</li></ul><h3 class="heading-node" id="irxjwq90n" style="text-align: left">4. Cybersecurity Measures&nbsp;</h3>M2P’s FRM training and tools address cyber threats that lead to fraud, such as phishing, malware, and ransomware. The integrated features ensure compliance and fortify institutions against cyber threats that often serve as gateways to financial fraud.<ul class="list-node" id="4jny8o2rw"><li>Multi-factor Authentication (MFA): Enforces layered security, making unauthorized access significantly harder.</li></ul><ul class="list-node" id="w2lxdvs95"><li>Threat Intelligence Integration: Delivers real-time updates on emerging cyber risks, enabling dynamic response to new attack vectors.</li></ul><h3 class="heading-node" id="os57yguml" style="text-align: left">5. Enhancing Operational Resilience&nbsp;</h3>Powerful fraud prevention isn’t just about detection—it starts with building resilient operations. By enforcing segregation of duties, intelligent access controls, and structured incident response protocols, the FRM system helps financial institutions reduce insider fraud and respond swiftly when threats arise. This resilience is essential for maintaining trust, minimizing disruption, and ensuring operational continuity amid evolving risks.<h3 class="heading-node" id="0gaqn2566" style="text-align: left">6. Custom Fraud Detection System&nbsp;</h3>A one-size-fits-all approach doesn’t work against dynamic fraud. Advanced FRM solutions offer the flexibility to design custom risk models that evolve with changing fraud tactics. By integrating data from multiple sources and leveraging machine learning, these systems continuously refine detection capabilities. This unified approach provides a comprehensive view of risk, enabling institutions to respond quickly to new fraud tactics and maintain a strong, adaptive defense against even the most sophisticated schemes.<h3 class="heading-node" id="720dugepn" style="text-align: left">7. Ethical Considerations&nbsp;</h3>Beyond compliance, our FRM system embeds ethical standards and responsible risk management into organizational culture. By promoting transparency, accountability, and whistleblower mechanisms, it deters insider threats and conflicts of interest. This ethical foundation not only reduces internal fraud risk but also builds stakeholder trust and aligns business practices with global standards of integrity, supporting sustainable growth and reputation.<h2 class="heading-node" id="b7cg2ouvx" style="text-align: left">A Future-Ready Approach to Fraud Risk Management&nbsp;</h2>The financial landscape is shifting, and so are the tactics of fraudsters. It’s not just about reacting to fraud—it’s about anticipating it, preventing it, and building trust in a digital-first world.By blending expertise, technology, and collaboration, FRM systems position institutions to lead the global fight against fraud, ensuring that innovation and inclusion go hand in hand with security.Don’t let fraud outpace your innovation.<a class="link" href="https://m2pfintech.com/contact-us/?activeKey=1" target="">Schedule a personalized demo</a> and discover how you can stay steps ahead of financial crime!&nbsp;<a class="link fui-Link ___1idfs5o f3rmtva f1ewtqcl fyind8e f1k6fduh f1w7gpdv fk6fouc fjoy568 figsok6 f1hu3pq6 f11qmguv f19f4twv f1tyq0we f1g0x7ka fhxju0i f1qch9an f1cnd47f fqv5qza f1vmzxwi f1o700av f13mvf36 f1cmlufx f9n3di6 f1ids18y f1tx3yz7 f1deo86v f1eh06m1 f1iescvh ftqa4ok f2hkw1w fhgqx19 f1olyrje f1p93eir f1h8hb77 f1x7u7e9 f10aw75t fsle3fq f17ae5zn" href="https://m2pfintech.com/newsletter/" target="_blank" rel="noreferrer noopener">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights directly to your inbox.Follow us on&nbsp;<a class="link fui-Link ___1idfs5o f3rmtva f1ewtqcl fyind8e f1k6fduh f1w7gpdv fk6fouc fjoy568 figsok6 f1hu3pq6 f11qmguv f19f4twv f1tyq0we f1g0x7ka fhxju0i f1qch9an f1cnd47f fqv5qza f1vmzxwi f1o700av f13mvf36 f1cmlufx f9n3di6 f1ids18y f1tx3yz7 f1deo86v f1eh06m1 f1iescvh ftqa4ok f2hkw1w fhgqx19 f1olyrje f1p93eir f1h8hb77 f1x7u7e9 f10aw75t fsle3fq f17ae5zn" href="https://www.linkedin.com/company/m2pfintech/mycompany/" target="_blank" rel="noreferrer noopener">LinkedIn</a>&nbsp;and&nbsp;<a class="link fui-Link ___1idfs5o f3rmtva f1ewtqcl fyind8e f1k6fduh f1w7gpdv fk6fouc fjoy568 figsok6 f1hu3pq6 f11qmguv f19f4twv f1tyq0we f1g0x7ka fhxju0i f1qch9an f1cnd47f fqv5qza f1vmzxwi f1o700av f13mvf36 f1cmlufx f9n3di6 f1ids18y f1tx3yz7 f1deo86v f1eh06m1 f1iescvh ftqa4ok f2hkw1w fhgqx19 f1olyrje f1p93eir f1h8hb77 f1x7u7e9 f10aw75t fsle3fq f17ae5zn" href="https://twitter.com/m2pfintech" target="_blank" rel="noreferrer noopener">Twitter</a>&nbsp;for insightful fintech bytes curated for curious minds like you.

The Rising Threat of Financial Fraud: Why Robust Risk Management is Essential?

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2023/06/FRM-Blog-Banner-2-1-2.webp" alt="M2P Fintech" title="" width="100%" height="383"><ul class="list-node" id="bbuv8bhp5"><li>Over 95,000 UPI fraud cases were reported in 2022-23.</li><li>More than 42% of Indians experienced financial crimes.</li><li>95% of Indian firms experienced new types of cyber frauds.</li></ul>Cyber frauds are surging every day.&nbsp; You may have experienced it, or you would have come across a cyber fraud victim. Living in an era of the highest technological sophistication and still falling prey to cyber frauds sounds like an irony.&nbsp;The global digital payments market is expected to grow at 15.5% and reach $111 billion in 2023 and hit $198 billion by 2027. Payment modes such as UPI, credit/debit cards, digital wallets, and other contactless modes have gained a lot of prominence due to their speed, convenience, and security. Despite phenomenal advances, cyber frauds in the form of phishing, spamming, SIM swapping, account takeover frauds, etc., increase by the minute. Hackers are evolving with technology and adopting sophisticated strategies to infiltrate banking infrastructure and commit cybercrime.&nbsp;This is why organizations need a robust Fraud and Risk Management (FRM) system to defend against data theft, breaches, and other forms of cybercrimes. Before getting into the details, let's first understand what is fraud and risk management.<h2 class="heading-node" id="k1k07wioo">What is Fraud and Risk Management?&nbsp;</h2>Fraud Risk Management is a systematic approach to reduce frauds, especially transaction related. It encompasses identifying, managing, and mitigating breaches in addition to preventing frauds and risks. Businesses that include financial institutions, ecommerce companies, healthcare providers, government agencies, and insurance companies, use FRM systems to combat risks associated with digital transactions.In this blog, we'll discuss how to design an FRM system and best practices to follow while designing. Before diving into it, let us go through the usual cyber frauds because knowing how hackers function can help you create an FRM system capable enough to handle those frauds.Here we go!&nbsp;<h2 class="heading-node" id="nm6kjndnr">Types of Cyber Fraud&nbsp;</h2><img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2023/06/Design-request-for-FRM-blog_2_V2-1.webp" alt="M2P Fintech" title="" width="100%" height="223"><h3 class="heading-node" id="u16fnp09p">Account Takeover (ATO) Frauds &nbsp;</h3>Account takeover fraud occurs when hackers gain unauthorized access to a victim's online account and take control, often without their knowledge or consent.&nbsp;&nbsp;<h3 class="heading-node" id="29imu321k">Phishing&nbsp;</h3>Phishing is an attacking method used in ATO where the hacker sends an email to a user posing as a genuine entity. The user gets tricked by believing the email to be legitimate and discloses their private information.&nbsp;<h3 class="heading-node" id="mdhb5jdk8">Brute-force Attack&nbsp;</h3>Hackers try a combination of username/password on multiple accounts till they crack into a user’s account.&nbsp;<h3 class="heading-node" id="1qp070zis">SIM Swap and Device-related Fraud&nbsp;</h3>SIM swap is a technique used by fraudsters to get control of a user’s phone number. By controlling the phone number, hackers can take advantage of two-factor authentication to access the user's devices, their bank accounts, social media accounts, and more.&nbsp;<h2 class="heading-node" id="m1sj54yqb">Authentication Protocols to the Rescue</h2>Most organizations have some sort of strategy to defend themselves from frauds. Some organizations use a proper FRM system, some follow stringent security protocols such as 3-D Secure Authentication (3DS) and Two-Factor Authentication (2FA) as an additional security layer. But the deployment of these security protocols depends on the marketplace. Many markets (such as the United States) do not use 3DS because they prefer customer convenience over security. This may lead to frauds unless strong controls are in place. On the other hand, in markets such as India where there is a mandate for 2FA, fraudsters still persuade gullible customers to share OTPs. Not taking requisite measures can give fraudsters access to stolen card credentials. They try their luck at different merchants to see if they can go through and bypass risk controls.&nbsp;The best way to battle cyber frauds is to design a risk engine capable of not only identifying existing frauds but also new ones.&nbsp;<h2 class="heading-node" id="drco1veje">How can you Design a Robust FRM to Tackle Fraud?</h2><ul class="list-node" id="08lc91nt7"><li>Accessing requisite data</li><li>Introducing the right balance between frictionless flows and challenges</li><li>Interfacing FRM with external systems</li><li>Embracing advanced risk checks</li><li>Adopting a combination of rules and models</li></ul><h3 class="heading-node" id="akzmswrji">Accessing Requisite Data&nbsp;</h3>In this data-driven world where frauds are mutating in novel ways like the Corona virus, we need requisite data to develop an efficient and holistic FRM system.&nbsp;<h4 class="heading-node" id="ph9lh45q3">Types of data we need for fraud management&nbsp;</h4><h5 class="heading-node" id="7t9bcfucg">Transaction data&nbsp;</h5>All financial data related to digital transactions, including credit card transactions, bank transfers, wire transfers, etc. This data must include the transaction amount, date, time, location, and other details. This data is used to build a historical profile of the customer.&nbsp;<h5 class="heading-node" id="8p7zx77jg">User data&nbsp;</h5>User information such as name, address, phone number, email address, employment, income, credit history, etc.&nbsp;<h5 class="heading-node" id="sohlvxzkd">Device data&nbsp;</h5>Device type, operating system, browser type, and other technical details.&nbsp;<h5 class="heading-node" id="1749otx7p">Geolocation data&nbsp;</h5>Location of the transaction - IP address, GPS coordinates, and other data that can be used to determine the user's location.&nbsp;<h5 class="heading-node" id="0s8b81av5">Behavioral data&nbsp;&nbsp;</h5>Browsing history, search history, and other online activities that may be relevant to the transaction.&nbsp;<h5 class="heading-node" id="vbouas7eo">External data</h5>Information from external sources, such as credit bureaus, public records, and other third-party sources that can provide additional insights into the user's risk profile.&nbsp; Now that you have all the requisite data for building an FRM system, what next?&nbsp;<h4 class="heading-node" id="zt4bvsebg">Customer profiling&nbsp;</h4>Customer profiling is a process in which a business or organization collects and analyzes information about their customers and analyzes their behavior, preferences, and potential risks.Comprehensive customer profiling enables business &amp; risk teams to design the most appropriate models &amp; rules to mitigate fraudulent transactions.&nbsp;&nbsp;<h3 class="heading-node" id="k0o72ows2">Introducing the Right Balance between Frictionless Flows and Challenges&nbsp;</h3><img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2023/06/Design-request-for-FRM-blog_3_V3_2000X1000.webp" alt="M2P Fintech" title="" width="100%" height="383">A natural question arises when developing an FRM system,Why not increase the number of authentication steps to increase security and prevent cybercrime?Yes, the authentication journey can be made more complex but will definitely impact the user experience.What will the user feel if they are subjected to strenuous procedures just to make a normal digital transaction?On the other hand, if the number of authentication steps are fewer/none, the probability of a hacker breaking into the system tends to go high. That is why, while designing a risk engine, it is important to strike a balance between frictionless user experience and introducing a challenge. Having a configurable, customizable challenge experience is critical to identifying different fraud strategies.&nbsp;&nbsp;<h3 class="heading-node" id="rbhucvi5z">Interfacing FRM with External Systems</h3>To enhance the security capabilities with the ever-evolving frauds, you need to interface the FRM engine with external systems such as whitelists, hotlists, spam lists, disposable lists, etc. By regularly pulling data from these systems, you can keep the FRM updated in real time.Let’s take a scenario.A user lost his credit card. He immediately alerts the card issuer to block the card. The issuer hotlists the lost credit card, meaning the card is permanently blocked. Now, when a hacker tries to make a transaction using the lost card credentials, an FRM system can classify it as fraudulent if it is interfaced with hotlists.&nbsp;Integrating hotlist information into the Fraud Risk Management (FRM) system can significantly enhance an organization's ability to identify and manage potential risks. These risks may include money laundering, fraud, terrorist financing, etc. By leveraging this integration, organizations can proactively mitigate these risks and ensure compliance with relevant regulations.&nbsp;<h3 class="heading-node" id="dwd2niduz">Embracing Advanced Risk Checks</h3>Behavioral biometrics distinguishes genuine users from criminals by analyzing users’ physical and cognitive digital behavior. By assessing user behaviors such as mouse movements, typing cadence, swipe patterns, device orientation, etc., and comparing it with the historical user profile, the behavior can be classified as either good or bad.For example, genuine users practice different paces and navigation patterns, whereas cybercriminals rely on copy, paste, and automated programs. Genuine users use the autofill feature to fill in personal details, whereas criminals enter the data manually.&nbsp;<h3 class="heading-node" id="t9lliq7kr">Adopting Rules and Models</h3>When building an FRM system, many organizations solely rely on Machine Learning (ML) models for fraud detection. ML models help the FRM system scale, adapt, and visualize emerging threats and frauds.Does that mean you should stop following a rule-based approach?After all, why should anyone still follow the rules when there are efficient ML models that can learn by themselves?Though the ML-based approach facilitates real-time processing and can automatically detect anomalies and unique frauds, it takes time to set up and train the models. Moreover, an ML-based approach can get tricky and complicated, whereas rules are good for certain edge cases where a rule must be deployed quickly to arrest a threat.That is why it is important to design a risk engine that combines rules and models.After building a risk engine based on the above steps, it is important to test the engine periodically in real-time and get feedback on its performance. That is the job of a fraud/risk analyst. Then, they improve the system by fine-tuning the rules and models.&nbsp;<h2 class="heading-node" id="ju5uswrou">M2P Fraud and Risk Monitoring System</h2>M2P’s Fraud Risk Monitoring system leverages all the best practices in designing a risk engine. It evaluates the risk associated with various use cases (transaction, onboarding, login, and other non-payment scenarios) across all channels, including cards (authentication &amp; authorization), BNPL, core banking, payment gateway, UPI, etc.&nbsp;Our FRM system combines many sources of data and performs customer profiling by interfacing with external system. We deploy advanced risk checks such as behavioral biometrics to classify genuine users and follow a holistic approach that combines rules and models.&nbsp;<h3 class="heading-node" id="0yp3vmls5">Why M2P FRM?&nbsp;</h3><h4 class="heading-node" id="nlv820xtf">Effective Rule and Data Management&nbsp;</h4>Our FRM lets the user upload historical data, review rule performance, and deploy it after fine tuning the rules. Depending on the implementation of risk rules, the users can run the system in a listening mode (without uploading any historical data). In this case, the source system receives the risk score but does not make business decisions. Users can turn off the listening mode once the risk rules have been finalized.&nbsp;If users do not have any pre-defined rule set, our system provides a standard rule set covering all mandatory and a few optional/ conditional parameters.&nbsp;<h4 class="heading-node" id="eyi1c6dvd">Customizable Case Management Modules&nbsp;</h4>The case management section allows the issuer to flag a certain type of transaction as a case (based on a case definition) and conduct further analysis to determine if the transaction was genuine/fraudulent. The case management flow can be customized as per business &amp; risk preference.&nbsp;Our Case Management module can help you:&nbsp;<ul class="list-node" id="tmaa6nywo"><li>Set case definition (automatic rule) to flag certain transactions as cases&nbsp;</li><li>Prioritize cases as high/medium/low&nbsp;</li><li>Assign cases to be investigated by analyst&nbsp;</li><li>Automate case investigation via IVR/SMS/WhatsApp&nbsp;</li><li>Assign and reassign cases based on category, ageing, priority, etc.&nbsp;</li></ul><h4 class="heading-node" id="kt5dbo5zy">Comprehensive Reports and Dashboard section&nbsp;</h4>From fetching detailed transaction report, rule performance report to case management report till managing overall FRM system performance, filtering the dashboard by score, transaction outcome, genuine vs. fraudulent transactions, etc., our FRM gives a comprehensive reports and dashboard section to the users.&nbsp;<h4 class="heading-node" id="dxbq3wuqi">Seamless Feedback &nbsp;</h4>Our FRM eases the life of the fraud analysts. Whenever the analysts come with feedback, it is easy for them to incorporate into our risk engine.&nbsp;At M2P, we have had the privilege of collaborating with a diverse range of clients, and built lasting relationships with banks, NBFCs, and neobanks. Our team consists of seasoned professionals who possess a deep understanding of market trends and industry standards. With this knowledge, we craft innovative solutions that effectively combat cyber fraud and provide our clients with the protection they need.Do you want to protect your customers from cyber frauds?&nbsp;Reach out to us at <a class="link" href="mailto:business@m2pfintech.com">business@m2pfintech.com</a>!&nbsp;This blog was co-written by <a class="link" href="https://www.linkedin.com/in/madhusudhanramakrishnan/">Madhusudhan Ramakrishnan</a>, Associate Vice President – Product Management, M2P.&nbsp;<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a> to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.&nbsp;Follow us on <a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a> and <a class="link" href="https://twitter.com/m2pfintech">Twitter</a> for insightful fintech tales curated for curious minds like you.&nbsp;

Building a Robust Fraud and Risk Management (FRM) System

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2023/06/2000X1000.webp" alt="M2P Fintech" title="" width="100%" height="358">Identity theft among pensioners is a rising pandemic that needs to be eradicated. Impersonating senior citizens by stealing or faking their life certificates with a motive to swindle their income is nefarious. The crime not only pushes pensioners into poverty but also piles lawsuits and losses onto pension disbursing authorities.&nbsp;<h2 class="heading-node" id="lkzhcveaf" style="text-align: justify">Pensioner Plight&nbsp;</h2>In India, there are over one crore pensioners, including those from the central government and defense forces. To receive pension, a retiree must submit their life certificates annually to the Pension Disbursing Authority (PDA). Banks, post offices, and other financial institutions serve as PDAs, that disburse pensions after authenticating the life certificates of pensioners.&nbsp; The mere process of physically receiving a life certificate and delivering it to the PDA is a significant effort for elderly pensioners, as the process is slow and tedious. You can only imagine the plight of pensioners who are sick, bedridden, or even living abroad. Accessing and moving the physical life certificate for pensioner verification is a grueling task for seniors.&nbsp;<h2 class="heading-node" id="rm4quf8we" style="text-align: justify">Launch of Jeevan Pramaan&nbsp;</h2>To make life certificate issuance convenient, the Indian government launched a digital service called Jeevan Pramaan in 2014. However, the service mandates senior citizens to have digital literacy. They also had to follow rigid steps and download multiple software. Seniors who are not tech-savvy face significant pressure in the process.&nbsp; This got us thinking about how we can help. We wanted to address the issues associated with the verification and distribution of digital life certificates.&nbsp;<h2 class="heading-node" id="gloui3z7e" style="text-align: justify">Our Solution: Digital Life Certificates&nbsp;</h2>We introduced the Digital Life Certificate (DLC) solution to streamline pensioner verification by making the process, quick, convenient, and seamless. Our DLC platform provides a flexible and convenient solution that can be accessed from the comfort of the pensioner's own home.&nbsp; And the best thing was our process saved significant time and effort for both the pensioner and the disbursing organization. We also customize the solution to suit specific requirements.&nbsp;<h2 class="heading-node" id="1srmxvygg" style="text-align: justify">Key Highlights of the DLC Solution&nbsp;</h2><ol class="list-node" id="09ttsi9if"><li>Multi-browser compatible web platform for generating DLC&nbsp;</li><li>Custom rule-based business engine&nbsp;</li><li>Active/Passive liveness detection&nbsp;</li><li>AI/ML-based Optical Character Recognition (OCR) techniques&nbsp;</li><li>Aadhaar OTP-based e-KYC or Digilocker&nbsp;</li><li>Integration with SMS gateway and email to push notifications to pensioners&nbsp;</li></ol><h2 class="heading-node" id="whd3zkfr1" style="text-align: justify">Pensioner Identity Verification Process Flow&nbsp;</h2>The pensioner’s identity verification process can take place in three ways&nbsp; A. Agent-assisted – The pensioner gets on a call with an agent to get the Digital Life Certificate. Both the call recording and the live picture will be saved.&nbsp; B. Self-assisted – The pensioner records himself during the process. He/she will answer the questions displayed on the screen and captures a live photo.&nbsp;&nbsp; C. Selfie-based – The selfie-based flow is customizable, where the customer can record himself by capturing an Officially Valid Document (OVD) or answering security questions displayed on the screen, and the selfie is captured.&nbsp;&nbsp; Irrespective of the process flows, the recordings will be sent to the auditor for review to verify the pensioner.&nbsp; Among these, the self-assisted process flow is more commonly used.&nbsp;<h2 class="heading-node" id="oj4ndy737" style="text-align: justify">How can Pensioners Secure Digital Life Certificates in a Self-assisted Process Flow?&nbsp;</h2>Our web-based DLC solution provides a hassle-free and convenient way for pensioners to obtain their digital life certificates in three simple steps.&nbsp; Step 1: The pensioner accesses the DLC platform via the link provided, input their data, and completes OTP-based mobile verification.&nbsp; Step 2: The pensioner then proceeds to complete Digi Locker-based Aadhaar verification using their Aadhaar number.&nbsp; Step 3: Liveness check is done using Active Liveness Detection, which involves performing gestures or reading out an OTP/statement suggested by the application.&nbsp; Step 4: The pensioner is directed to the DLC process summary. The DLC will be available in a pdf form, and upon receiving the DLC, a confirmatory message is sent to the pensioner’s mobile/email.&nbsp;<h2 class="heading-node" id="7n4jb2vwr" style="text-align: justify">Live Use Cases - Digital Life Certificates&nbsp;</h2>Odisha is the first state in India to provide a Digital Life Certificate (DLC) facility through Video KYC. We collaborated with the Odisha government and National Insurance Company Limited (NIC) in West Bengal to deliver digital life certificates to their beneficiaries/pensioners.&nbsp;&nbsp; Telangana, Uttar Pradesh, Tamil Nadu, and Andhra Pradesh are a few other states in India that have implemented our OTP-based digital-KYC solutions.&nbsp;&nbsp; So far, we have issued digital life certificates to over 5 lakh pensioners across the country through our web-based platform.&nbsp;&nbsp; Thanks to the in-hand availability of cutting-edge technologies and the three well-organized robust process flows, our platform is readily accessible to pensioners.&nbsp; Do you want to streamline pension verification?&nbsp; Write to us at <a class="link" href="mailto:business@m2pfintech.com">business@m2pfintech.com</a>.&nbsp;<a class="link fui-Link ___1qmgydl f3rmtva f1ewtqcl fyind8e f1k6fduh f1w7gpdv fk6fouc fjoy568 figsok6 f1hu3pq6 f11qmguv f19f4twv f1tyq0we f1g0x7ka fhxju0i f1qch9an f1cnd47f fqv5qza f1vmzxwi f1o700av f13mvf36 f1cmlufx f9n3di6 f1ids18y f1tx3yz7 f1deo86v f1eh06m1 f1iescvh ftqa4ok f2hkw1w fhgqx19 f1olyrje f1p93eir f1h8hb77 f1x7u7e9 f10aw75t fsle3fq" href="https://m2pfintech.com/newsletter/" target="_blank" rel="noreferrer noopener">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox. Follow us on&nbsp;<a class="link fui-Link ___1qmgydl f3rmtva f1ewtqcl fyind8e f1k6fduh f1w7gpdv fk6fouc fjoy568 figsok6 f1hu3pq6 f11qmguv f19f4twv f1tyq0we f1g0x7ka fhxju0i f1qch9an f1cnd47f fqv5qza f1vmzxwi f1o700av f13mvf36 f1cmlufx f9n3di6 f1ids18y f1tx3yz7 f1deo86v f1eh06m1 f1iescvh ftqa4ok f2hkw1w fhgqx19 f1olyrje f1p93eir f1h8hb77 f1x7u7e9 f10aw75t fsle3fq" href="https://www.linkedin.com/company/m2pfintech/mycompany/" target="_blank" rel="noreferrer noopener">LinkedIn</a>&nbsp;and&nbsp;<a class="link fui-Link ___1qmgydl f3rmtva f1ewtqcl fyind8e f1k6fduh f1w7gpdv fk6fouc fjoy568 figsok6 f1hu3pq6 f11qmguv f19f4twv f1tyq0we f1g0x7ka fhxju0i f1qch9an f1cnd47f fqv5qza f1vmzxwi f1o700av f13mvf36 f1cmlufx f9n3di6 f1ids18y f1tx3yz7 f1deo86v f1eh06m1 f1iescvh ftqa4ok f2hkw1w fhgqx19 f1olyrje f1p93eir f1h8hb77 f1x7u7e9 f10aw75t fsle3fq" href="https://twitter.com/m2pfintech" target="_blank" rel="noreferrer noopener">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Tag: "Fraud Risk Management Frm (8)"

Product

About

Compliance

Resources