There has been a 324 per cent increase in the money involved in online fraud cases in three years despite a 46 per cent decline in the number of cases, according to a joint report by Assocham and PwC.

“According to the RBI, while the number of fraud cases declined from 24,791 in 2009-10 to 13,293 in 2012–13, the amount involved has increased substantially from ₹2,038 crore to ₹8,646 crore,” the report said.

It further said that around 65 per cent of the total cases reported by banks were technology-related frauds (committed through/at an internet banking channel, ATMs and other payment channels like credit/debit/prepaid cards), whereas advance-related frauds accounted for a major proportion (64 per cent) of the total amount involved in fraud.

In India, frauds worth ₹11,022 crore were unearthed in public sector banks between April-December 2014, and 2,100 cases of fraud were reported to the RBI, said the report.

Net & mobile banking

The internet is fast becoming the favoured mode for performing financial transactions — checking one’s bank balance, requesting for bank statements and cheque books, upgrading debit cards and even purchasing virtual goods.

A majority of the banks in India offer online and mobile banking services. Most of the transactions are conducted via payment cards, debit and credit cards, and electronic channels, such as ATMs. Consequently, both private and public banks as well as other financial institutions in India are becoming increasingly vulnerable to sophisticated cyber attacks.

Recent innovative financial services, such as mobile wallets, have also been targeted by fraudsters. Similarly, money management tools are becoming increasingly susceptible to cyber threats and related frauds.

Banks, mostly private sector, have also launched multi-social payment apps that allow customers to transfer money through social media channels, such as Facebook and WhatsApp.

Such technological solutions also expose customers as well as financial institutions to the risk of bank spoofing, hijacking of mobile phones and SIM card cloning, the report highlighted.

According to the Minister of Communications and IT, cyber fraud cases worth ₹497 crore have been reported by the RBI and CBI since 2011.

Fraudsters a step ahead

The report observed that, “Fraudsters are devising new ways to exploit loopholes in technology systems and processes. In the case of frauds involving lower amounts, they employ hostile software programs or malware attacks, phishing, SMSishing and whaling (phishing targeting high net worth individuals) apart from stealing confidential data.

In February 2013, the RBI advised banks to introduce certain minimum checks and balances, such as introduction of two-factor authentication in case of ‘card not present’ transactions.

According to RBI records, 22 million of the 589 million bank account holders use mobile banking apps.

The volume of mobile banking transactions has risen from around ₹1,819 crore in 2011-12 to approximately ₹1,01,851 crore in 2014-15.

Currently, 74 per cent of the Indian population own mobile phones. Mobile payment volumes have hence registered a steady rise.

Growing m-shopping

A recent study on e-commerce in India by Accel Partners estimated that shopping through mobile phones grew 800 per cent in 2013. It is expected to show a compounded annual growth rate (CAGR) of 150 per cent by 2016.

According to the RBI, the primary responsibility of preventing frauds lies with banks.