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New Delhi: Artificial intelligence (AI) can play a critical role in fraud detection in the finance and banking industry, especially as digital banking is seeing major adoption in India due to the covid-19 pandemic.

With more users now banking online, the risk of being duped by fraudsters is higher than before. A May survey by ACI Worldwide and YouGov found that 32% Indians were using digital payments more, while 31% were recently targeted by a card or digital payments fraud or know someone who was.

According to a 2019 RBI report, losses due to banking frauds have grown by 73.8%.

Dilip Asbe, MD, CEO, National payments Corporation of India (NPCI), said that many banks in India have already launched fraud detection robo advisory services for investments. Asbe was speaking at the global AI summit RAISE (Responsible AI for social Empowerment), being held online from October 5-9.

Also, speaking at the summit, T Rabi Shankar, executive director at the Reserve Bank of India (RBI), agreed that AI backed robo advisory services have a lot of potential.

RBI recently proposed the Positive Pay System for cheque truncation system to prevent frauds in high value cheques.

“As the software develops more it will be easy to identify misuse of the cheque system and at some point of time it may minimize instances of check frauds significantly. Similarly in fighting money laundering AI and data can help substantially in identifying trends in movement of money and prevent money laundering," said Shankar.

RBI has also put in place a central information registry. Once enough data is collected over a period of time, it will enable prevention, detection and reduction of fraudulent transactions in the financial system, added Shankar.

He further added that AI will be key in online dispute resolution and reducing dependence on human intervention.

According to NPCI’s Asbe, while adoption of AI in finance and banking in India has been growing, most of the applications are still support related and not meant for decision making, unlike countries like China where many of the critical tasks like loan sanctions are now being handled by AI.

“Industry has started using AI in a fairly good amount. But most institutions in the financial services are still using AI for support and not for decision making," said Asbe.

Citing the example of China, Asbe pointed out that AI is being used for many of the lending decisions by financial institutions in China which allows them to process loans in 30 seconds.

“However, in China the law of the land is fairly strong which allows them to deal with the defaulters in a different way than we can in India," Asbe added.

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