Tech service providers leverage financial sector expertise for new biz

TSPs have long been associated with the transformation of the financial services industry; now, they are using that domain knowledge to help digital commerce and startups hire the right people

Technology service providers (TSPs) have been the backbone of India’s financial services industry through the sector's digital transformation, even as they kept pace with fraud and risk management. 

These companies, who provide back-end infrastructure solutions to entities, are now using their experience in financial services to cater to segments such as e-commerce and quick commerce, gig economy, fast moving consumer goods (FMCG), and even gaming. 

Use cases include background verification and know your customer (KYC) protocols, onboarding, criminal record checks, and fraud prevention. 

“We have an onboarding, risk and fraud as well as a privacy and data governance platform. The company controls about 70 per cent of the market today when it comes to delivery executive onboarding,” said Ashok Hariharan, chief executive officer (CEO), IDfy, an identity verification company. 

Participants in the gig economy and merchants get on to digital commerce platforms using back-end solutions provided by TSPs. 

The clients have to upload documents and get them verified by systems which ensures that tampered details do not contaminate the system. 

The TSPs can then map a profile based on different forms of data that they process. Bank statements analysed from individuals who receive salary from high-risk companies, unusual spends at categories such as gambling or alcohol, the residential  address of a person and his spend habits can enable firms to process a risk profile of the individual. These solutions are hosted on the commerce platform itself thereby ensuring data protection and security. 

“The challenge with the gig economy is that companies may not have data about the participants. Unlike financial services, companies may have constrained budgets to process in-person verification of delivery executives. Thus, during verification, we analyse their IP address, run them through a crime check via publicly available FIR reports,” said Gaurav Gupta, senior product manager at Signzy, a regulatory tech (regtech) company. 

Hariharan explained that the company taps into a database of 330 million criminal records to verify the background of an individual across segments such as delivery executives and merchants for loans, insurance and credit cards. 

Companies of all sizes belonging to diverse segments tap into solutions offered by TSPs at a time when cyber frauds, identity theft, and financial fraud are on the rise. 

In the banking sector alone, fraud has risen over four times in the past five years to 36,075 in financial year 2023-24 (FY24). Fraud through digital payments (card or internet) increased to 29,082 in FY24 as compared to 2,677 in FY20, according to the Reserve Bank of India’s annual report. 

“We have an artificial intelligence (AI) model that tells us if a document has been tampered with or not. For photos, we do a face match and tell if it’s the same person. We have a 'single photo liveness' model,” Hariharan told Business Standard. 

Gupta explained that the company’s model for governance, risk and compliance taps into anti-money laundering (AML) detection capabilities too. 

“We are connected with a lot of databases worldwide, and we check if there have been sanctions, or reports of frauds concerned with any designated party. We also keep a tab on transaction monitoring,” he said. 

Hariharan added that tech-enabled capabilities such as computer vision, natural language processing, and data science enables the company to categorise individuals based on their risk profile. For instance, he explained that an individual sending money back home every month is less likely to default on a loan. 

“The likelihood of him defaulting on a loan is 0.2 per cent compared to others since there is responsibility involved towards families,” he added. 

Fresh pastures 

*  Serve clients beyond financial services

  *  Other sectors include qcomm, ecomm, gig economy, and gaming

  *  Handle onboarding, verification, fraud and risk

  *  Map a risk-based profile for entities, individuals

  *  Rise comes at a time when fraud management gains significance