Financial Institutions Turn to Data Analytics Startups to Combat Rising Digital Banking Fraud

Legacy financial institutions in the country are facing a surge in cyberattacks targeting their digital banking services, prompting them to seek assistance from data analytics startups to strengthen their customer verification processes and risk management.

One such startup, Mumbai-based Data Sutram, has been aiding institutions like IndusInd Bank, IDFC First Bank, Union Bank of India, DMI Finance, and IIFL Finance with its innovative product, ‘DS Authenticator Trust Score’. Founded in 2018, Data Sutram’s trust score helps evaluate each customer during account opening or credit assessment based on a scale of zero to 1,000, analyzing data from various sources to assign the score. 

According to Rajit Bhattacharya, co-founder of Data Sutram, the misuse of digital accounts due to inadequate customer verification prompted banks to look for more robust solutions. He highlighted issues like multiple identities from the same IP address or location going unchecked. 

Data Sutram has secured $5.4 million in equity funding from investors like Bharat Innovation Fund, Singularity Growth Fund, and IIFL Fintech Fund. 

Financial institutions, especially those focusing on digital platforms, often face challenges in maintaining robust data security systems. Recent incidents involving Kotak Mahindra Bank and HDFC Bank highlight vulnerabilities in digital banking applications. 

Startups like Bureau Inc, backed by Quona and GMO Venture Partners, have introduced innovative solutions like the ‘Money Mule Score’ to help detect potential fraudsters during user onboarding using device fingerprints, behavioral patterns, and historical data. 

RBI data shows a significant increase in domestic payment frauds, emphasizing the urgency for banks to update their systems with support from fintechs. 

Kunal Varma, co-founder of fintech company Freo, emphasizes the importance of partnerships between fintechs and banks to accelerate technology enhancements in areas like KYC and loan processing. 

In the modern banking model, startups like TeamLease RegTech play a crucial role in accelerating customer onboarding processes while ensuring robust controls to combat fraud risks. 

Industry experts stress the significance of early investments in data analytics to gain a competitive edge in combating evolving fraud challenges in the digital banking ecosystem.