Have banks lost the customer-service plot?

My 83-year-old mother-in-law received a call from someone claiming to be from her bank. The caller asked her for know-your-customer (KYC) details. Within a couple of hours, over 13 unauthorised transactions, totaling Rs 9.4 lakh — far exceeding any of her previous transactions — were made, said Santosh Desai, Managing Director (MD) & Chief Executive Officer (CEO), Futurebrands India.

“We filed a complaint with the police and the bank, but encountered extreme callousness and indifference. Initially, her relationship manager giggled. We mostly dealt with the bank’s junior staff, who did not have the authority to resolve the issue. Even after contacting a zonal head and finally the bank’s CEO, the issue remains unresolved after two and a half months,” he added.

Desai cited two fundamental concerns.

“First, banks are fully aware of the prevalence of fraud in the digital world, yet lack proactive systems to protect vulnerable individuals who cannot easily distinguish between fraudulent and legitimate calls. I constantly receive KYC calls myself,” he said.

Desai highlighted that the redressal system of banks to be completely broken. "No one takes responsibility and the temporary credit offered by the bank is unusable. They reek of tokenism. The trend is not limited to ICICI Bank. My driver had a similar experience with Paytm. Only after a LinkedIn post did someone agree to take action," he said.

Recently, the National Consumer Disputes Redressal Commission (NCDRC) has ruled that the State Bank of India (SBI) must refund Rs 97 lakh to an elderly couple who lost Rs 63 lakh due to fraud committed by their driver. The NCDRC highlighted SBI's negligence in safeguarding the couple's account, emphasising the vulnerability of senior citizens in financial matters.

The Mumbai Police arrested four people involved in a cyber fraud case where a senior citizen from King Circle was defrauded of Rs 5 lakh. The perpetrators impersonated SBI bank officials to deceive the victim, according to a media report.

Bank fraud in India has surged by around 300 per cent in financial year (FY) 24 and in absolute numbers 36,075 cases were reported. The figure is much higher, as compared to FY22 when 9,046 cases were reported, as per a report by Reserve Bank of India (RBI).

However, the total value of these frauds fell significantly, dropping from Rs 45,358 crore to Rs 13,930 crore, representing a 46.7 per cent year-on-year decrease. The RBI attributed the dip to a paradigm shift in the nature of fraud.

Private sector banks reported the highest number of cases over the past three years. On the contrary, public sector banks accounted for the largest share of the total fraud value.

The RBI's annual report highlighted a predominance of digital payment fraud, including card and internet payments. Loan portfolio fraud dominated as far as value is concerned. The pattern was stark between public and private sector banks.

Small-value digital payment fraud constituted the majority of cases in private sector banks, while public sector bank fraud was largely concentrated in loan portfolios. Card and internet payment fraud cases skyrocketed from 3,596 in FY22 to 29,082 in FY24. The corresponding uptick in value was from Rs 155 crore to Rs 1,457 crore during this period.

The RBI's analysis of FY23 and FY24 data showed a significant delay between the occurrence and detection of fraud. A substantial portion of the fraud value reported in FY23 was at 94 per cent, while the corresponding figure for the following fiscal year was at 89 per cent.

Multiple people came forward with their own grievances with bank frauds and poor customer service after Desai's LinkedIn post.

"I went through a similar ordeal during the lockdown restrictions and lost Rs 1.8 lakh from my Axis Bank account within 30 minutes. Even though I complained immediately to block the account, the bank took no action. I requested PayTm to look through the transactions and they told us the destination where the amount was deposited. Despite these details, neither the police nor the bank could recover the amount. We need more awareness and education about digital transactions. There are absolutely no safeguards in place to prevent cyber thefts," said Priyanka Matanhelia, an artist, researcher and storyteller.

Nancy Kurian, Director, Admissions and Marketing, Oakridge International School, faced a similar scam of Rs 35,000. “Upon following up on investigations with ICICI Bank, they said that since the transaction has been done by me, I’m not eligible for any reversals. I had filed cyber complaints and shared evidence of the scam, but they simply ignored it. There was news that the scammers have been arrested for duping around Rs 6 crore. However, banks still did not take any action. ICICI Bank is horrible with its services and I shall shortly close my banking services with them. Just to add, the customer service lady was rude to address my concerns,” she said.

She also lashed out at ICICI Bank's redressal system.

“They informed me that they couldn't do anything as the case is closed. They suggested that I contact the cybercrime department for a refund. It seems they’re not just helpless but useless. If big scams aren't being addressed, who will care about smaller scams involving amounts of Rs30,000-40,000?" she added.

These harrowing accounts highlight a significant disconnect between banks and their customers, which often worsens the impact of fraud.

According to report by Accenture, 36 per cent of banking customers who fell victim to cybercrime reported a loss of trust in their bank. Among these customers, 65 per cent expressed willingness to switch to another financial institution.

Accenture’s survey shows most consumers use their bank’s digital channels for quick functional tasks. For example, around 63 per cent said the majority of their mobile banking logins are simply to check their account balance. The data also illustrates how digitalisation has reduced personal interaction between bank and customer: 44 per cent of consumers aged between 18 and 44 had difficulty getting human support when they needed it. These findings suggest that digital channels are functionally correct, but emotionally devoid. They do not help forge a personal connection between bank and customer that goes beyond a transactional relationship — only 25 per cent said their bank performs ‘extremely well’ when it comes to being aware of important changes to their financial and personal situations.

This communication gap presents an opportunity for marketing to play a crucial role as by educating and empowering consumers, banks can proactively reduce the risk of fraud.

Yes Bank has taken proactive steps by sending emails to customers like “Quick Guide to Safeguard Your Money from Online Fraudsters”, which provides practical advice and tips to help customers protect themselves.

Ravi Santhanam, Group Head, Chief Marketing Officer & Head – Direct to Consumer Business at HDFC Bank, emphasised the importance of communication in consumer protection. He said, “Communication needs to address how consumers can protect themselves from fraud. When fraud occurs, it's because customers are being cheated — fraudsters exploit vulnerabilities and hack passwords or obtain one time passwords [OTPs]. We need to invest in technology so customers understand the security of our products. Our mobile banking is both device and SIM-bound; it cannot be accessed outside the device it's currently installed on, and attempts to screenshot the screen result in a blank image. This increases the security quotient.”

“Second, we must increase the awareness quotient. If someone voluntarily shares their user ID and password, nothing can prevent fraud. We must educate customers on what to believe and what not to believe. Fraudsters are one step ahead. We need to communicate effectively with our customers to help them avoid these scams. We utilise pre-monetary transaction alerts, AI to identify unusual patterns, and follow up with customers for confirmation. Our Vigil aunt, a social media influencer, also promotes fraud awareness,” he added.