India Migrates Payments Fraud Reporting To New Suptech System

January 5, 2023
A new supervisory technology (suptech) system is now live in India, and has taken over as the main channel for banks and other financial institutions to report suspected payments fraud.

A new supervisory technology (suptech) system is now live in India, and has taken over as the main channel for banks and other financial institutions to report suspected payments fraud.

Daksh, as the system is known, is described by the Reserve Bank of India (RBI) as an “advanced supervisory system” that can automate payments fraud reporting, management and analytical processes.

“Daksh is a web-based end-to-end workflow application through which RBI shall monitor compliance requirements in a more focused manner, with the objective of further improving the compliance culture in supervised entities like banks and non-bank financial companies (NBFCs),” said Yogesh Dayal, chief general manager at RBI.

“The application will also enable seamless communication, inspection planning and execution, cyber incident reporting and analysis through a platform which enables anytime-anywhere secure access.”

After going live on New Year’s Day, the RBI has asked all regulated entities to start using Daksh for payments fraud reporting purposes going forward.

In addition to the RBI’s existing bulk upload facility to report payments fraud, Daksh provides additional functions such as maker-checker facilities, online screen-based reporting and an option for requesting further information.

It also allows users to issue alerts and advisories, and provides tools to generate interactive dashboards and reports.

According to RBI’s reporting guidelines, payment system operators or participants must report all instances of payment fraud, including attempted instances, irrespective of value.

This includes instances of fraud that are detected by the operators themselves or by their customers.

Previously, this information was to be submitted to the RBI via the Electronic Data Submission Portal (EDSP), but with the launch of Daksh, the EDSP will be discontinued, and all its historical data will be migrated to Daksh.

The RBI also said that the reporting format will remain the same despite the switch as outlined in an appendix.

India fights fraud with tech

The launch of Daksh, which translates as “efficient” or “competent” in English, builds on the RBI’s previous moves towards a more tech-based and systemised approach to payments fraud reporting.

In 2019, the RBI announced that it would launch a Central Payments Fraud Information Registry (CPFIR).

At the time, the central bank said that changes in India’s payment fraud reporting system were necessary to meet changes in consumer behaviour and its associated risk profile.

“With the digital payment ecosystem making substantial progress in terms of growth of payment infrastructure, as well as volume and value of digital payment transactions, fraud risk monitoring and management by the stakeholders have assumed importance,” said the RBI.

India's digital payments growth has been particularly outstanding over the last few years. VIXIO estimates based on data from the National Payments Corporation of India (NCPI) show 96bn non-cash transactions made across its systems in 2022 (i.e. excluding transactions processed by international card schemes). This is a tenfold increase compared with 2017, when there were just 9bn.

The RBI also noted that it had anticipated these changes in its Payment System Vision 2021, and had called for a more structured framework for the collection and sharing of payments fraud data among firms.

Using the CPFIR, which went live in March 2020, payment system participants were able, for the first time, to monitor payments fraud data in near-real time.

The RBI also began publishing aggregated data on payments fraud to educate consumers about the increased risk of fraud when making digital payments.

The CPFIR and the EDSP were both considered significant technological leaps from India’s previous fraud reporting system.

Prior to the CPFIR, payments fraud reporting duties were handled by the Central Fraud Monitoring Cell, a dedicated office under the RBI’s Department of Banking Supervision, which moved from Mumbai to Bengaluru in 2013.

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