Changing Landscape of Security in NBFCs

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Cashless payments are gaining a widespread acceptance amongst Indians in recent times. Be it the traditional banking entities or non-conventional emerging players like NBFCs, everyone is ensuring there is safe and secure payment system. Focusing on the rising significance of digitisation and need for the safe online payment system, Rashi Aditi Ghosh of Elets News Network (ENN) explores the changing roles of NBFCs in terms of security.

 Digitisation – A Popular Trend in India

NBFCs_SecurityAccording to OrbisResearch.com’s report on “Digital Payment Systems Market in India-Drivers, Opportunities, Trends, and Forecasts to 2022”, Indian digital payments industry is expected to reach $700 billion by 2022 in terms of value of transactions. It is expected that more than 80 percent of the urban population in India will adopt digital payments as a part of their routine by 2022 and 70 percent of the retail chains will adopt the same.

Nikhil Bandi, Chief Information Officer, Vistaar Financial Services Pvt Ltd, says, “Journey of NBFCs with the touch of technology has become very smooth. Thanks to Prime Minister Narendra Modi-led government that has flagged off Digital India initiative, financial institutions have transformed and are more progressive now. Penetration of Aadhaar, e-KYC (Know Your Customer) are also adding a new dimension to this journey.”

Emphasing on the role of digital payments, Mihir Bhavsar, Head, IT Indostar Capital Finance Pvt Ltd, says, “Cashless transactions are need of the hour. It is important for the customers to understand that e-payments are way safer and convenient than the cash transactions. Customers can complete their complete their transactions easily without visiting the bank branch physically.”

Indian digital payments industry is expected to reach $700 billion by 2022 in terms of the value of transactions.

Significance of Security in NBFCs

Anything that is available on the internet or can get connected to it has the risk of getting hacked.  To ensure a safe and secure banking experience, the need to have a robust cybersecurity mechanism is vital.

On one hand, the demand for digital payments is set to rise, on the other hand, the scare of cyber fraud is also bothering the financial institutions.

According to the Indian computer emergency response team (CERT-In), 50 incidents affecting 19 financial organisations have been reported during the period of November, 2016 to June, 2017.

Atyujwal Deka Network and Cyber Security Sales Lead, West, North & East India, Cisco India says, “Ninty-five percent of the companies are targeted by of malicious traffic in the recent times. Hundred percent of the organisations are contracted with website holding malware. No organisation is safe today because the threat can be caused internally as well. Several employees and the employers search various websites using the Internet of their own organisation and unfortunately if any of the searched websites contain malware, the entire host network has the risk of getting infected.”

Explaining the risk of in-house cyber fraud, Rajesh Singhal, Head, IT and CISO, Indian Clearing Corporation Ltd says, “The biggest threat that the e-payments face today, occurs within the organisation. Consumers have the tendency to use weak passwords, sharing their One Time Passwords (OTPs) and ignoring the statutory warnings. It is important to ensure proper training and awareness with  regard to e-payments before implementing digitisation.”

It is expected that more than 80 percent of the urban population in India will adopt digital payments as a part of their routine by 2022 and 70 percent of the retail chains will adopt the same.

Role of Technology in Ensuring Data Security

Ensuring a strong cybersecurity is in place is not just important from the transactions point of view but it is equally important to protect the data as well.

There is a need to ensure top security for various confidential files, any casual approach in it can lead to tremendous losses in various dimensions.    Data leakage can prove most damaging for any company, costing immeasurable losses at times for a company.  Technology’s role can be critical.

Talking about the importance of data security and the role by technology in ensuring the same, Chakradhar GR, Head- IT, Vaya Finserv Pvt Ltd, says, “As a part of Information Technology applications used within our organisation, we ensure that the implementation and authorisation are complete. We ensure two-factor and multi-factor authentication in the IT systems that we use. Not just in IT but from an infrastructure point of view also our data is completely secured as all us we use cloud technology.”

NBFCs’ Growing Significance

The NBFC sector in India is growing at a very fast pace. Several industry experts believe that the lending market is as big as $600 million and this is going to grow further at a rate of 19 -21 percent. To ride this growth wave efficiently, it is very important for the NBFCs to embrace smart technology.

NBFCs have been able to emerge as the new leaders of the Banking, Financial Services and Insurance (BFSI) Sector due to their ability to innovate and office customised products based on the demands of the customers. Agility in workflow and lowering down operational costs are also two very important factors that led to the rise of NBFCs.

Sanjay Sharma, Co-Founder and Managing Director, Aye Finance, says, “With rise of technology, NBFCs are lauded with a plethora of opportunities. The best part of this phase is the availability of tech-led services at much affordable prices unlike the scenario in the earlier times. Deploying a new technique is also way cheaper in the recent times.”

Their (NBFCs) ability to adopt Cloud-based lending software which comeswith features such as paperless loan sourcing, giving access anywhere anytime, strong Business process Management, Lending Analytics built with Artificial Intelligence, Omni-channel sourcing and Smart Collections, helped them in ensuring a secured experience to its consumers.

Ganapathy Subramanian, Co-Founder & Chief Operating Officer, FundsCorner says, “Security management in a financial institution depends on the way it looks at its technology implementation and adaptability. As soon as an organisation starts thinking about embracing technology for data management, security automatically takes the front seat. We believe in creating awareness amongst our employees and customers making them conscious to the fact that safety is paramount.”

Role of technology in terms of security is growing significantly because of one big reason —  Every organisation in every industry is now digital. Every corner of every business is now either a vulnerability point or a valuable target. And the upcoming adoption of Artificial Intelligence (AI) and the Internet of Things (IoT) will only deepen this trend.

“Today, one cybercriminal with one lucky attack can take down a multi-billion-dollar company, either through ransomware or a credibility-destroying leak. There might be a bit too much emphasis on “new technologies” in cybersecurity. Obviously, we believe in using new technology to protect our clients. After all, we did develop the world’s first comprehensive AI-Driven MDR programme. But, modern cybersecurity needs to be about more than bolting a shiny new technology onto an obsolete approach to cyberdefense, as many MSSPs now do to stay relevant. We must constantly rethink cybersecurity from the ground up,” says Jose Varghese, EVP & Head of MDR Services,Paladion Networks.

Why should NBFCs Adapt Smart Technology?

India is a diversified market and in a bid to reach the requirements of consumers both in the urban as well as the rural areas simultaneously is not an easy task.

It is therefore significant to embrace emerging technologies and transforming traditional systems to technologies such as Cloud and Artificial Intelligence. This will offer assistance in expanding the reachability. On one hand it will help in strengthening the customer base by streamlining the services, on the other hand it will also bring down their operational cost.

Jyothirlatha B, Chief Technology Officer, Dewan Housing Finance Corporation Limited, says, “The acquisition cost meant for financial institutions should be less, and digitisation is the only option that can make this happen. We, at Dewan Housing Finance Corporation Limited, have taken several digital initiatives such as e-sanction. Our sales team has been provided with tablet computers so that the data generated can be digitised at the first place.”

NBFCs, in today’s market, have to play smart and offer products that meet the rapidly changing requirements of consumers. For example, a CRM system in lending business can help in understanding the customer needs, it can also assist in tracking leads with real time updates, increase awareness with tailored automated messages and mails and building sturdy relationship with customers.

Manoj K Mishra, Chief Technology Officer, Magma Fincorp Ltd says, “There are two sides of Information Technology (IT), traditional IT that delves into lending applications, ERPs, CRM etc. There is a lot of struggle in dealing with this section. The other side of IT is all about Artificial Intelligence, Machine Learning, Data Science and several others. This segment, in particular, is very helpful in mitigating the challenges faces by NBFCs.”

It is important for lending companies like NBFCs to have an agile and secure system. It helps them in combating the risk of frauds. Several tools like business process management will help the financial institution in deploying rules for lending and workflow processes for the internal team to accept, reject, disburse loans and collections management.

Ravi Bajaj, Director-IT, Insta Capital Pvt Ltd says, “Earlier, banks and NBFCs would have to spend a lot on having a good technology setup and providing a seamless customer experience. It comprised getting an infrastructure and hiring a team of technology developers for the functioning of the software. But today with cloud services, Application Programming Interface integration and use of software services, information technology is making it a level playing field for NBFCs to compete in this extremely dynamic space.”

While the competition in the NBFC market is inflating with each passing day, it is ) important for the sector to implement technologies like Artificial Intelligence, Machine Learning and Analytics. These technologies will assist in tracking product performance, customer performance, customer choices, trends, Behavioral patterns in lending and re-payment.

Joydeep Dutta, Executive Director & Group Chief Technology Officer, Central Depository Services (India) Limited says, “The need for technology-based upgradation excites a lot of us in the financial sector. However, in sync with advancement, it is also crucial to understand the fitment of the technology. Do not apply technology just for the sake of doing it unless it accelerates your business growth.”

According to the Indian computer emergency response team (CERT-In), 50 incidents affecting 19 financial organisations have been reported during the period of November 2016 to June 2017.

While tech-innovations are gaining a lot of popularity among the NBFCs, the need to understand the exact fitment of technology and its relevant implementation is something that needs a lot of acceptance.

Experts favour the implementation of tech-driven innovations for development of NBFC sector and fighting away the risk of cyber-frauds but they also suggest to analyse the use of apt technologies based on the need of the hour.

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