42% Indians surveyed experienced financial fraud in the last 3 years; 74% of those who experienced it failed to get money back

Aug 4, 2022, New Delhi: Digitisation of payments and banking undoubtedly has a lot of benefits for both people and the government, however, it has led to a rise in financial frauds as cyber criminals now have more ways to obtain citizens’ personal financial data, such as details of debit & credit cards. Many times, citizens have become victims of sophisticated and coordinated financial frauds with hackers cleverly committing forgeries or misrepresentation to obtain and access citizen’s personal data, banking details, and even access to their devices, including email and social media accounts. The Reserve Bank of India (RBI) data which might miss a lot of unreported frauds still shows that frauds to the tune of INR 60,414 crore were witnessed in 2021-22. Collectively, the bank frauds have resulted in India losing at least INR 100 crore every day over the past 7 years, reported RBI. These financial frauds, as per the central bank, have been classified as misappropriation and criminal breach of trust, fraudulent encashment through forged instruments, manipulation of books of account, fictitious accounts and conversion of property, unauthorised credit facilities extended as reward for illegal gratification, negligence and cash shortages, cheating and forgery, irregularities in foreign exchange transactions and any other type of fraud not coming under any of the specific heads mentioned. According to the Microsoft 2021 Global Tech Support Scam Research report, consumers in India experienced a fairly high rate of online fraud of 69% in 2021.

To curb the menace, many efforts have been made by the Government of India vis-a-vis RBI through financial inclusion, financial literacy, and financial security. Despite these efforts, financial experts state that people continue to fall victim to the most common tools used by hackers like phishing, vishing, frauds using online sales platforms, frauds due to the use of unknown/unverified mobile apps, ATM card skimming, frauds using screen sharing app/remote access, SIM swap or SIM cloning, frauds by compromising credentials on results through search engines, scam through IR code scan, or impersonation on social media.

As people continue to store their sensitive personal financial details like banking passwords, and information related to their ATM debit and credit cards on their smart phone, email, or computer, they remain vulnerable to financial frauds. The LocalCircles survey in October 2021 revealed that 29% of citizens share their ATM or debit card pin details with close family members, while 4% share it with their domestic and office staff. The survey also revealed that 33% of citizens store their bank account, debit or credit card and ATM passwords, Aadhaar and Pan numbers on email or computer, while 11% of citizens have stored these details in their mobile phone contact list.

Storing sensitive financial details on a phone’s contact list, email, or computer poses a significant risk to cyber attacks, especially if the gadget is stolen or falls into wrong hands. Using smart phone’s ‘contact list’ to store banking passwords and details of ATM, bank account, email, etc., is a very unsafe way to store such sensitive information / credentials because online apps nowadays ask for permission to access one’s contact and messages. While some select apps can be trusted, others cannot be and have been utilised to defraud people. India’s cyber security researchers recently identified 167 counterfeit iOS and Android apps used by hackers to steal money from people.

To understand the magnitude of the issue, LocalCircles conducted a bottoms-up survey asking people if they or their family members have fallen victim of financial fraud in the last 3 years, also the nature of frauds they experienced. The attempt was also to understand if the victims were able to get their funds back or if there was some kind of resolution. The survey received nearly 32,000 responses from citizens across 301 districts of India. Of the total 62% respondents were men and 38% respondents were women. Around 43% respondents were from tier 1, 30% from tier 2 and remaining 27% respondents were from tier 3, 4 and rural districts.

42% Indians surveyed say they or someone in their family have been a victim of financial fraud in the last 3 years

The first question in the survey asked citizens, “Have you or someone in your immediate family been a victim of financial fraud in the last 3 years?” In response, the 54% of citizens said “Thankfully, no one”. However, 4% said “Yes, multiple members”, and while 38% revealed “Yes, one of us in the family”. Only 4% couldn’t say. On an aggregate basis, 42% of Indians surveyed say they or someone in their family have been victims of financial fraud in the last 3 years. This question in the survey received 11,065 responses.

Bank account fraud, fraud by fly-by-night eCommerce operators, credit and debit card frauds account for most incidents in the last 3 years

To the question on the nature of the financial frauds experienced in the last 3 years, 29% respondents to the survey said “Bank account fraud”, 24% said “Fraud by eCommerce sites”, and 21% said “Other frauds”. Breaking down the poll, 18% said “Credit/debit card fraud”, 12% said “Fraud by mobile apps”, 8% said “ATM card fraud”, and 6% said “Insurance fraud”, while 3% did not respond. The survey showed that bank account fraud, fraud by fly-by-night eCommerce operators, credit and debit card frauds are major causes of the problem. This question received 9,936 responses.

Of the families who experienced financial fraud in the last 3 years, only 17% were able to get their funds back; 74% could not get any resolution

To the final question in the survey: “For the different financial frauds you or someone in your immediate family has experienced in the last 3 years, did you get your money back?” In response, 10% said “Yes, filed a complaint with the platform and got it back”, and 7% said “Yes, filed a complaint with authorities and got it back”. However, 36% said “No, the matter is still pending”, 19% said “No, there was nowhere to go”, and another 19% said “No, decided to not file a complaint”. Remaining 9% were noncommittal. The survey reveals that in the last 3 years, only 17% of those who lost their money due to banking frauds were able to get back their funds back while 74% could not get any resolution. This question in the survey received 10,995 responses.

In summary, 42% of Indians surveyed say they or someone in their family has been a victim of financial fraud in the last 3 years. Bank account fraud, fraud by fly-by-night eCommerce operators, credit and debit card frauds are among top frauds they have experienced during the period. Of the families who experienced financial fraud in the last 3 years, only 17% were able to get their funds back; 74% could not get any resolution.

The RBI has been advising citizens to report any financial frauds they have experienced. To safeguard against such financial loss, experts have been advocating use of alpha-numeric password lock for email, computer and mobile phones, in such a way that is difficult to crack. Importantly, at random intervals, one should change their account password used for making transactions. Banks need to make more efforts to promote financial literacy in various Indian languages. Citizens on the LocalCircles platform also suggested that from time-to-time the government, along with RBI, should organise awareness programmes on the risk of financial frauds, and how theft of financial information takes place and what all needs to be protected. Similarly, there is an urgent need to fix the redressal processes when the consumers approach their bank or financial institution. If only 17% who faced a financial fraud were able to get their funds back, it clearly indicates that even for those who complain, only 1 in 6 are likely to find the redressal and that too after many follow ups and a long time. Similarly, the policing system, which is the first complaint point for a large majority of Indians is just not sensitised to handle such issues or even provide guidance.

LocalCircles will be sharing the findings of the survey with related stakeholders so that the feedback of citizens via this survey can lead to action by the Central Bank and the Government so necessary policy interventions, awareness and sensitisation can take place.