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Business News/ Money / Personal Finance/  Financial frauds you should guard yourself against, here's how

Financial frauds you should guard yourself against, here's how

Invest with caution, do your due diligence and seek the help of a trusted advisor to safeguard yourself from financial frauds.

Recently some online banking frauds came to surface where victims were not sent OTPs before the money was transferred out of their bank accountsPremium
Recently some online banking frauds came to surface where victims were not sent OTPs before the money was transferred out of their bank accounts

Conversations around investments and wealth creation have become mainstream in the last decade. Whether you are channelling overseas investment through Singapore or Dubai, investing from India’s financial capital Mumbai, or evaluating relevant financing options from a tier III town, you are bombarded with endless options of financial products and services, each promising to be the best.

While it is heartening to see the transition and growing acceptance, it is equally threatening as many of these products and services come with their own complexities. They claim to simplify your life, but they are not that simple!

Financial products evolve with changing times and needs. And Technology has played a significant role in bringing this transformation. Take the example of how online payments have taken off from simple barter to physical currency notes to UPI Payments.

Life has become far more convenient as you can make a payment simply by scanning a QR code or punching a PIN or OTP. But there is a negative to every positive. We have been witnessing increased incidences of gullible consumers being defrauded as well. Most of us must have heard about “Jamtara" if we haven’t seen it. So “Buyer beware."

Similarly, credit has become far more accessible & affordable. Most E-commerce platforms now offer a “post-paid" limit based on buyers’ previous purchases and creditworthiness, and their own eagerness to make a sale. The process has become so efficient and seamless that you just have to select an option at the checkout, and Voila! You “Buy Now and Pay Later."

Same way credit cards have been a blessing for smart people who can manage their credit cycles well, at the same time enjoying a great shopping experience. While this undoubtedly helps to advance purchases, overindulging in “BNPL" can inculcate unhealthy credit behaviour. This impacts your credit score and puts undue stress on your finances. Because whatever you are buying on BNPL, you have to repay it.

The most-apt relevance of “Buyer beware" is in making investing decisions. With the rise of Tech-enabled platforms and more access to information online, many want to or have adopted a “Do it Yourself" approach. For the one who is a savvy investor, professionally qualified, and can dedicate time & resources to research & diligence, the DIY approach works well but what about the majority of others? Most investors don’t fall into the “well-informed" category, which increases their chances of getting into investing pitfalls lured by all kinds of messages for joining free investment tips groups and making impulsive investment decisions.

Cryptocurrency investment is the top of mind recall for all of us when it comes to fad-based investing. Many investors jumped into the Crypto world in 2021 without understanding anything about it. In 2022, either of the two things happened: The cryptocurrency they bought lost in huge percentages, or the exchange or wallet they used went bankrupt or their funds simply vanished.

Another tangent is diligence by investors. The objective of the Investor Memorandums and Information documents was to make the investor aware and help him make an informed decision, but it has become a tool to protect the product offering by adding clauses tough to comprehend. As an investor, you ought to be doing thorough research & diligence before deciding to invest.

Most of these offerings, whether UPI, BNPL, or online trading platforms, are amazing concepts that not only have form and functionality but have added substantial ease and convenience as well. They have helped in penetration for financial products, and have brought down the cost substantially, all of this helps & favours the investors.

Yet, one needs to remember, nothing comes without a price tag. The convenience, variety and affordability come bundled with misinformation and mis-selling. It is important for investors or buyers to beware.

A trusted advisor who acts as a sounding board and who can guide investors in making informed decisions is a must. The capabilities of these revolutionary financial products, services and platforms are mind boggling and when coupled with the acumen of an advisor make an excellent combination for investing success. Top that with your own research and understanding as protecting yourself is your responsibility first.

Nimesh Sanghvi, Associate Director - Products, blinkX by JM Financial

These are the remedies for victims of online frauds. 
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These are the remedies for victims of online frauds. 

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Published: 04 Apr 2023, 02:23 PM IST
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