Summary of this article
RBI urges banks to aim for zero-fraud systems
Transparent pricing seen as key to customer trust
Collaboration needed to manage technology-driven banking changes
The banking industry needs to strive towards a zero-fraud environment and guarantee transparency in the pricing of products and services for customers' trust in the banking industry, said T Rabi Sankar, the Deputy Governor of the Reserve Bank of India (RBI). He said trust is at the heart of maintaining customer loyalty in the banking system, especially at a time when technology is changing the face of financial services rapidly.
Speaking at the concluding session of the 21st Indian Banking Technology Conference, Sankar said that banks should ensure that their customers understand clearly what they are paying for. If pricing is not transparent or seems unfair, customers may choose alternative platforms or service providers.
Trust is Crucial to Customer Loyalty
Sankar underlined that the concept of transparency in pricing is closely linked to trust. Customers require a level of certainty that the charges they pay are reasonable and are not exploitative. While the banking system has made strides in effective pricing, he said some basic tenets still need to be adhered to in order to gain the confidence of the customer.
According to him, making how prices are calculated easier and understandable to people can help reduce customer dissatisfaction and prevent customers from moving away from traditional banking channels. Transparency also helps in creating long-term relationships between the banks and their users.
Technology is Changing the Role of Banking
The deputy governor cautioned that the functions being performed by banks today will not necessarily be the same in the future because of rapidly changing technology. He pointed to developments in the payments space as an example of how technology can alter existing roles and structures.
In this context, he urged banks to leverage technology to bring about better aggregation and pricing efficiency. This approach, he said, could help banks stay competitive and provide fair and efficient services to customers.
Sankar added that transparent pricing systems could reduce the need for varying charges across users. If prices are worked out in an open and clear manner, the difference in pricing may not arise, and the system would be simpler and more predictable for the customers.
Need for Collaboration in Innovation
He stressed that the best way innovation can work is when there is collaboration across the industry. Banks, system providers and other stakeholders need to work together and share ideas to address challenges relating to pricing, fraud prevention, and customer trust.
Sankar has requested the banking industry to come forward with suggestions on how transparency and pricing efficiency can be improved. According to him, collective effort is important to create systems that are resilient and customer-friendly.
Fraud Levels are Falling, but Risks Remain
On fraud, Sankar noted that incidents in payment systems have been declining over time. Card-related fraud, which was once high, has shown a positive trend in recent years. He said the levels of fraud in Unified Payments Interface or UPI currently stand at 0.68 per lakh transactions.
In absolute terms, this equates to some 4,800 fraudulent transactions per day. With daily transaction volumes of around 70 crore, the proportion may seem small. However, Sankar said that even low fraud rates may become a serious concern when the user base is large.
He explained that the absolute number of fraud cases is still significant and requires the attention of banks and providers of such systems. The level of trust in the payment system depends on how well such risks are handled.
Zero-Fraud as a Goal
Sankar said that while it may not be realistic to think that fraud can be completely eliminated, it is important to aim to have a zero-fraud environment. This goal would help banks to remain alert and motivate them to build systems that curb fraudulent activities.
Even low levels of fraud, he said, are not acceptable. Continuous efforts are needed to uproot risks and safeguard users. He concluded by saying that trust, transparency and collaboration will be critical in ensuring that the banking system is strong and reliable in the years ahead.
