RBI flags concern over rising cyber attacks

While migration to digital payments bodes well for the country, both in terms of cutting the cost of printing currency as well as leaving a trail of all such transactions leading to better tax compliance, it also opens new risk frontiers as digital payment channels are introduced to people with varying economic background and literacy levels, according to Reserve Bank of India.

The central bank’s observations comes in the context of the rise in cyber attacks over the last few years.

It elaborated that recent incidents such as misuse/compromise of a number of cards by launching ingenious attacks on an ATM infrastructure, remote cyber attack on a bank from an overseas vendor location and attack on a cross border fund transfer system (albeit no loss was incurred due to timely alert) pose serious concerns on the potential impact of such attacks on financial stability, if left unmitigated.

“Not only simple attacks using phishing, vishing and social engineering, but also increasingly audacious attacks by organised gangs with or without backing by State players have come to light,” the RBI said in its latest Financial Stability Report.

The report observed that increasing confluence of demographic change and technological breakthroughs are forcing banks to adopt delivery channels such as ATMs, Internet and mobile banking, which are transforming them into faceless entities.

The recent push for digitisation of financial transactions has led to growth in use of digital products, particularly the wallets and Unified Payments Interface (UPI). In April, the Government announced rolling out of the Bharat Interface for Money (BHIM) app across the country and exhorted people at large to adopt digital ways of payments and receipts.

In such a scenario, no system can be considered safe unless the entire ecosystem is secure, which is very challenging to ensure, the central bank said.

“Two aspects need to be appreciated in this context. One, technology has reached a section of population which is not yet fully geared to adopt technology in a risk-aware manner. Two, the vendor risk faced by the banks have become more complex with multiple levels of outsourcing, leading to sophisticated technical support being ultimately provided by lowly paid and often unskilled manpower,” the RBI said.

These need to be addressed quickly by spreading awareness on the risks and ensuring that technical services are provided only by technically skilled resources, it added.

The report elaborated that a cyber security incident could threaten financial stability through three channels — incidents can (i) disrupt the operations of a financial firm that provides critical services, (ii) reduce confidence in firms and markets, and (iii) damage the integrity of key data.

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