The impact of technology on finance: Enhancing experiences and safety

However, this digital revolution has given rise to a concerning surge in financial fraud. As technology advances, so do the methods employed by cybercriminals to exploit vulnerabilities. There is a significant increase in instances of fraudsters posing as employees of fintech platforms, attempting to obtain sensitive information such as One-Time Passwords (OTPs) or persuading individuals to download unauthorised applications, ultimately leading to the theft of financial data and the draining of bank accounts. According to the Reserve Bank of India (RBI), the number of fraud cases in the card and internet segment surged to 12,069 cases, involving ₹630 crore during Q1 FY24. It marks a significant increase compared to the 2,321 cases reported for just ₹87 crore in the corresponding period of the previous year, as outlined in the RBI's report on the trend and progress of banking. Overall, banks reported 14,483 instances of fraud during this period, totalling ₹2,642 crore, down from 5,396 cases amounting to ₹17,685 crore in the preceding year.

A prime example of the need for better checks and balances is the recent crackdown by the RBI on certain loan app scams. These scams involved illegal entities disguised as legitimate lending platforms, luring unsuspecting borrowers into predatory lending practices and subjecting them to harassment and extortion. The RBI's stern actions, including the imposition of penalties and the revocation of licenses, underscore the urgent need for robust regulatory oversight and consumer protection measures.

The most vulnerable groups are those with limited exposure to financial markets and the banking system, including the elderly, homemakers, and individuals with lower educational attainment. According to a recent study by Check Point Research, the financial services sector experienced a staggering 38% increase in cyberattacks in 2022 as compared to 2021, underscoring the urgency of prioritising cybersecurity and fostering digital literacy among consumers.

Leading boutique incubation, investment, and advisory platforms in India have taken proactive steps to mitigate these risks. These platforms have developed loan facilitation applications that enable seamless customer onboarding, credit score verification, and secure transaction execution. While these platforms generate OTPs and validate user identities, the challenge lies in guiding customers unfamiliar with digital platforms through the processes.

To address this, these platforms actively encourage customers to navigate the journey independently or enlist the assistance of supervised partners, reducing the fear of falling victim to fraudulent activities. Furthermore, platforms offering savings and investment services are implementing stringent measures to ensure end-to-end security, including conducting comprehensive Corporate Social Responsibility (CSR) audits by third-party agencies, obtaining validation from credit bureaus, and adhering to rigorous compliance standards.

Underpinning these efforts is the crucial need for continuous customer education and awareness. Financial institutions and regulatory bodies must collaborate to disseminate best practices for online borrowing and executing digital financial transactions. By empowering individuals with the knowledge and skills to identify and mitigate potential risks, the industry can cultivate a more secure and trustworthy digital financial ecosystem.

In conclusion, the impact of technology on finance is a transformative force, revolutionising accessibility and convenience while simultaneously necessitating robust security measures. As the digital space continues to evolve, industry leaders, regulatory bodies, and consumers must remain vigilant, prioritising cybersecurity and fostering a culture of digital literacy. By striking a balance between technological innovation and robust safety protocols, the financial sector can harness the full potential of digital transformation while safeguarding the interests of all stakeholders.

This article is authored by Karan Desai, founder, Interface Ventures.