Preventing Fraud and Improving Customer Experience: The Role of AI and ML in Indian Banking

The widespread adoption of digital banking has made transactions more convenient, but it has also opened up new avenues for fraud and scams. In India, One Time Passwords (OTPs) are used extensively in the banking sector, but the reliance on this security measure has also brought its own set of challenges.

One of the major challenges faced by customers is the delay in the delivery of OTPs, which can lead to time-out errors and prevent them from completing their transactions. This is particularly problematic for senior citizens who may not be as familiar with digital banking. Furthermore, scammers have been using social engineering techniques to obtain OTPs and commit frauds, leaving customers feeling vulnerable and insecure.

The impact of OTP-related frauds in India has been significant. According to a report by the Reserve Bank of India, there were over 12,000 cases of digital fraud reported in the country in 2019-20, resulting in a loss of over INR 1,400 crores. The number of cases is only expected to rise as the adoption of digital banking continues to grow.

To address these challenges, banks in India need to embrace advanced technologies such as Artificial Intelligence (AI) and Machine Learning (ML) to make their systems more secure and efficient. These technologies can help in detecting abnormal patterns and prevent frauds before they occur.

For example, AI-powered systems can analyze the user's behavior and transaction history to identify any unusual activity. If the system flags a transaction, it can seek additional verification from the user before proceeding with the transaction. This can help prevent fraudsters from accessing a customer's account and prevent financial losses.

In addition to preventing fraud, AI and ML can also help improve the delivery and reliability of OTPs. AI-powered systems can predict the optimal time to send an OTP and ensure that it reaches the user's device in a timely manner. This can reduce frustration and anxiety for customers who have to wait for the OTP to arrive.

In conclusion, the adoption of AI and ML can provide a more secure and efficient digital banking experience for customers in India. By detecting frauds before they occur and improving the reliability of OTPs, banks can foster greater trust in online transactions and encourage more customers to embrace the digital mode of banking. It is high time for the banking sector in India to embrace these technologies and take a proactive approach to secure the financial interests of their customers.