Payment firms seek action against lax lenders, telcos

Top payment companies owned by global giants Google, Alibaba and Walmart are seeking regulatory and government intervention against alleged inefficiency at some banks and telcos in helping curb customer frauds. These are UPI based frauds where customer accounts are compromised after the victims are socially manipulated either through a targeted phone call or through SMSes by the fraudsters to remotely gain access to sensitive financial information, such as bank account details or unique One Time Passwords (OTPs)

A popular Netflix documentary named ‘Jamtara’, which was released in January, was made around the proliferation of these fraudsters in Hindi heartland districts.

The contention of the payment companies is that because the payment interface is such that the function of banks and telecom operators is largely restricted to backend processes, the major brunt of criticism over these frauds fall on payment companies even when they may necessarily not be at fault.

“The biggest responsibility in this space is with telecom operators that make a small amount of money on these SMSes and are letting our brand name be abused by letting these messages go,” Vijay Shekhar Sharma, CEO of Paytm, told ET in a recent interview. “The fact that they are not able to stop these messages from reaching customers is resulting in losses to both us and the customers. This is not just a problem for Paytm but also for industry and the people of this country.”

Separately, these companies are also facing challenges in monitoring fund flow once the bank account gets compromised by the fraudster as often times it is found that accounts used by fraudsters are registered under fake names and addresses. Paytm, Google Pay and PhonePe, the three companies that dominate over 90 per cent of UPI market share in India, are now seeking regulatory intervention for a more proactive and collaborative industry led response system to deal with customer frauds.

For example, while Google Pay has made multiple representations to NPCI over the last six months on the issue of KYC negligence by banks, Walmart's PhonePe too is working with the Ministry of Home Affairs and the Reserve Bank of India to highlight the laxity of telecom operators in blacklisting SMS spamsters and banks in proactively blocking compromised accounts, senior executives from these companies told ET.

“We’re having ongoing dialogue with NPCI, where we have made several representations with them in the last six months on the matter of fake KYCs accounts,” said Saikat Mitra, Director, Trust & Safety, Google India. “We are finding that several multiple KYCs are linked to a single account making it impossible for us to track once the fund is transferred from the victim’s account.”

Deliberating on this point further is PhonePe’s risk management head Anuj Bhansali, who highlights that multi account fake KYC and mule accounts are created just for the purpose of withdrawing victim’s money out without being traced. “Even with risk detection algorithms, its scope faces limitations. The problem is that the custodian of the money is still the bank… Without industry collaboration, we can’t break the chain and break the ability to take money out and the frauds will continue to rise,” said Bhansali, PhonePe’s director of product development.

Paytm on the other hand has led a group of seven internet companies such as Swiggy, Zomato and Ola to both the banking regulators RBI and telecom regulators TRAI to point out the systemic lapses emerging from negligence of partner businesses. According to RBI data, FY19 saw 14,794 complaints registered at central bank’s Ombudsman Offices on frauds pertaining to mobile and electronic banking, up 75 per cent from the 8,487 such complaints registered in FY18. Similarly, the complaints around debit card and ATM related frauds surged nearly 50 per cent in this period to 36,539 in FY19.