BS BFSI Summit: SBI's Nitin Chugh backs 'happy friction' to reduce fraud

SBI's Nitin Chugh introduces the concept of 'happy friction' - a system of checks and balances to protect vulnerable accounts and reduce cybercrime

At the Business Standard BFSI Insight Summit on Thursday, Nitin Chugh, deputy managing director of the State Bank of India (SBI), discussed how banks are addressing the rise in cybercrime and digital frauds.

 

Chugh, who leads SBI’s digital banking and transformation initiatives, introduced the concept of ‘happy friction’—a system of checks and balances that can protect vulnerable accounts and curb cybercrime.

What is 'happy friction' in banking?

In a conversation with Tamal Bandyopadhyay, consulting editor at Business Standard, Chugh explained, “In our drive to make everything seamless and frictionless, we need to consider adding some ‘happy friction’—necessary steps of authentication for vulnerable profiles to ensure security before they can move money willingly.” 

 

Chugh noted that if a transaction is unusual for a customer’s regular spending habits, extra checks and security can help protect against unauthorised access to vulnerable accounts.

How can data science help detect potential frauds?

Chugh highlighted how data science can aid in preventing fraud by identifying individuals at a higher risk of being targeted. “Data science can help us pre-identify people who may be more vulnerable to scams,” he said, noting two categories of vulnerable individuals: those at risk of being scammed and those who may unknowingly become money mules.

 

When asked if banks could penalise mule account holders, Chugh stated, “As a bank, you can’t punish an account holder…you reverify the credentials. If unsatisfied, you report it as suspicious.”

New emerging trend of chargeback fraud

At the three-day event in Mumbai, Chugh discussed a new trend of chargeback fraud. In this scam, customers make a fake purchase, return the item, receive a refund, and then claim they never received the product.

 

Addressing this, Chugh said, “When a customer raises 50 or 500 chargeback requests in a month…it’s unusual. We question them, and if unsatisfied, we disable such accounts and report it.”

What is RBI's digital intelligence platform?

The Reserve Bank of India (RBI) is working on a digital payments intelligence platform to counter real-time payment frauds. Explaining the initiative, Chugh noted, “The RBI is examining a digital payments intelligence platform because real-time payments are vulnerable to fraud. Collective intelligence will be key—not just from banks but other stakeholders as well.” 

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