A friend of mine got a call from a real number a few weeks back. Let’s call friend B and caller X. X said he was calling from the bank and offered to upgrade B’s credit card. X asks for the card number to verify B’s creditworthiness, and B shares it. B felt a little uneasy while sharing the number. B’s worst fears seem to have come true when X asks him to provide the security code.
B realized that he had been set up for a scam. He said the security code was ‘420’. X said it looks wrong. B replied that ‘420’ was the correct description of X (Section 420 of the Indian Penal Code deals with cheating and dishonesty). X abused B before hanging him. Thankfully, B didn’t lose any money and had the last laugh. But my friend who considers himself a tech-savvy financially conscious person came very close to getting scammed. What happened to B is probably happening to thousands of people across the country every day. Nevertheless, the true extent of financial fraud remains unknown due to the lack of accurate data.
Although financial firms and regulators collect data on customer complaints, unreported complaints do not enter their databases. Most customers do not consider it appropriate to report fraud to the police or financial regulators. Even when it comes to complaints against their own banks or financial apps, most customers chose to remain silent rather than appeal to the customer grievance cell or regulatory ombudsman. For example in the case of B, he did not feel that lodging a complaint would help in catching the scammer.
An online poll by Microsoft and YouGov in 2021 found that among major markets, Indians were more likely to be victims of tech support scams. These are scams in which a scammer claims to provide technical support services in order to defraud customers. Another online survey conducted by LocalCircles in 2022 found that 42% of respondents had experienced some form of financial fraud in the past three years; And 74% of respondents who experienced this type of fraud failed to get their money back.
These figures differ significantly from the crime figures reported in the National Crime Records Bureau (NCRB) and regulatory figures reported by financial regulators such as the Reserve Bank of India (RBI). Official records show that only a small fraction of Indians are affected by financial crimes.
A similar distinction holds when it comes to customer complaint data. A 2022 research paper by Vimal Balasubramaniam, Renuka Sane and Shristi Sharma states that for every complaint on banking and payments that makes it to the regulatory system, there are 60 complaints that go unvoiced. For insurance products, the ratio is 80 complaints for every official complaint, their research shows.
The researchers used a telephone survey in the National Capital Region (NCR) to record real-world examples of customer complaints and compared them against data collected by ombudsmen of regulatory bodies such as the RBI and the Insurance Regulatory and Development Authority of India (IRDAI). compared survey data. , Banking and payment complaints were mostly about transaction issues, while insurance complaints were mostly about mis-selling. The researchers found that people with lower education or wealth levels were less likely to complain.
While these studies are helpful in ascertaining the possible extent of underreporting in official figures, they do not provide nationally representative data on the true extent of financial crimes or the true incidence of financial complaints in the country. Online elections leave out a large part of the country’s population. Telephone surveys have better coverage than online surveys, but may still miss certain demographic groups. Even when telephone numbers are dialed at random, respondents’ decisions whether or not to respond to a survey may not be completely random.
To ascertain the true extent of financial malfeasance and outright fraud, Indian policy makers need to invest in a nationally representative consumer experience survey. A large-scale household survey can tell us how different demographic groups access various financial instruments, the barriers they face, and their awareness of grievance redressal mechanisms. This can indicate the groups that are most vulnerable to online fraud or manipulation. Studies in other countries suggest that those new to online apps and the elderly are particularly vulnerable to fraud and mis-selling. But there is a lack of official data on such issues in India.
Immediately after India’s independence, due to the lack of data on rural finance, the RBI took the initiative to conduct a survey on the financial behavior of rural Indians. As the National Sample Survey Organization (NSSO) took over such surveys, the survey capabilities of the RBI eroded. As pointed out in an earlier column, RBI’s household survey on inflation expectations is neither nationally representative nor reliable (‘Bad data undermining RBI’s fight against inflation’, March 22, 2022 ). The Reserve Bank of India and other financial regulators need to work with survey experts to design a survey that tracks the pain points of the average financial consumer.
Technology has changed the world of finance in the last few years. While it has opened up many new possibilities, it has also created new risks. Regulators need to carefully understand the extent and nature of these risks before taking action to counter them.
Pramit Bhattacharya is a journalist based in Chennai. His twitter handle is pramit_b
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