Outsmarting the Outsmarted: Real-Time Solutions in the Battle Against Fraud

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By Puja Sharma

As fraudsters become more sophisticated–innovative solutions are leveraging real-time data and adaptive APIs to streamline customer verification and enhance security during onboarding.

Shobhit Goyal, CEO and Co-Founder at BeFiSc Outsmarting the Outsmarted: Real-Time Solutions in the Battle Against Fraud
Shobhit Goyal, CEO and Co-Founder at BeFiSc

Why should companies use fraud indicators, and how does it work with the help of API’s?

Fraudsters are becoming increasingly sophisticated, often outsmarting traditional verification processes. At the same time, companies are wary of losing legitimate customers due to lengthy and cumbersome onboarding procedures.

At BeFiSc, we address this challenge by utilising information that customers typically remember or have readily available. Our unique approach offers a comprehensive 360-degree real-time verification of customers. By leveraging a single identifier—such as a mobile number, PAN, or GST—we can authenticate the legitimacy of individuals or businesses, assess their financial status, evaluate fraud risk, and identify any discrepancies that may suggest suspicious activity.

Our innovative API seamlessly integrates with existing onboarding flows, enabling businesses to collect and analyse data in real time. It taps into various sources, including government databases, financial institutions, and fraud detection networks. This allows companies to swiftly evaluate the risk associated with a customer or transaction, all while minimising friction for genuine users.

What could be the reason for lending companies shut down?

FinTech startups in the lending space often face significant operational and regulatory challenges, leading to high default rates and unsustainable business practices. Poor risk assessment is a major issue, resulting in default rates as high as 7-15%. Many startups are more focused on chasing numbers to attract funding, prioritising growth over sustainable risk management. This approach often leads to non-compliance with critical RBI regulations, particularly around KYC norms, which can expose them to legal and financial penalties.

These companies often operate more like marketing firms, aggressively pushing loan disbursement without paying enough attention to the long-term risks. As a result, cash flow issues arise due to their over-reliance on external funding, creating liquidity problems. Their weak recovery mechanisms further exacerbate the issue, as they struggle to effectively recover defaulted loans, putting additional strain on their finances.

A deeper concern lies in their inadequate risk assessment frameworks. Many FinTechs lend to high-risk customers without conducting thorough credit checks, worsening default rates and increasing their exposure to financial loss. This short-sighted approach not only attracts regulatory penalties for violating RBI guidelines but also highlights the unsustainability of their business models. Rapid scaling without solid financial foundations leaves these companies vulnerable to collapse.

Moreover, a lack of innovation hinders their ability to adapt to evolving technologies and market demands, limiting their potential for long-term success. To overcome these challenges, FinTechs need to prioritise robust risk management, compliance, and technological innovation, ensuring that their growth is sustainable and aligned with regulatory requirements.

What role does AI play in upgrading the security & efficiency of KYC Procedures?

AI-driven solutions are revolutionising KYC processes by automating key tasks and enhancing security measures. Automated document verification allows AI to instantly authenticate IDs and documents, minimising human error and streamlining the onboarding process. In addition, biometric authentication technologies, such as facial recognition and fingerprint matching, provide a more secure and seamless way to onboard customers, reducing reliance on traditional methods. These innovations not only improve accuracy but also bolster security, creating a more trustworthy system for both banks and customers.

Moreover, AI’s ability to analyse vast amounts of data in real-time accelerates KYC checks, ensuring faster compliance without compromising thoroughness. Continuous monitoring of customer activities enables institutions to detect suspicious behaviour and proactively prevent fraud. By automating these processes, AI significantly reduces operational costs, as manual work is minimised, allowing businesses to improve efficiency while adhering to regulatory requirements. This combination of speed, accuracy, and cost savings makes AI an essential tool in modern financial compliance.

What obstacles do FinTech startups encounter with KYC, and how can they navigate these compliance challenges?

FinTech startups often struggle with KYC compliance due to several key challenges. Many fail to stay updated with evolving regulations and take too long to implement necessary processes. Instead of tailoring their compliance strategies, they often replicate what other FinTechs are doing without proper verification. A common misconception is underestimating the sophistication of fraudsters, which leads to prioritising cost savings on KYC over security, diverting funds to marketing instead.

To overcome these challenges, startups should invest in systems that provide real-time regulatory updates and develop tailored KYC processes that address their specific needs. Prioritising fraud prevention by dedicating adequate resources to secure and efficient KYC solutions is essential. Building strong partnerships with KYC service providers, like BeFiSc, and leveraging AI-driven technologies can enhance accuracy and speed, helping startups stay compliant while minimising operational costs.

How can identity verification solutions be tailored to address the needs of rural and underbanked populations in India?

One of the things that irritates me the most is that most KYC providers and identity verification companies do not understand that people in rural areas do not have the documents that urban Indians have. So, their solutions will not work there. To effectively serve rural and underbanked populations, identity verification solutions need to account for the lack of traditional documentation like PAN cards, GST, passports, or driver’s licences.

Many rural residents rely on alternative IDs such as ration cards or voter IDs. Verification systems must be adaptable to these documents while ensuring they meet compliance standards. Additionally, offline and low-data solutions are essential to cater to regions with poor internet connectivity. Companies need to design localised, flexible systems that address the unique realities of rural populations, ensuring accessibility and inclusion for everyone.

How are businesses preparing to address future challenges in identity verification and fraud prevention?

Currently, many businesses rely on static identity verification processes that fail to adapt to the rapidly changing nature of fraud. These outdated methods often lead to longer onboarding times and increased customer drop-offs, particularly in regions with limited access to traditional documentation. Additionally, many companies focus heavily on compliance as a checkbox exercise rather than integrating it with fraud prevention strategies, leaving gaps for sophisticated fraudsters to exploit.

To address these issues, businesses need to transition to adaptive, risk-based verification systems that dynamically adjust verification levels based on user behaviour and risk profiles. Offering tailored verification pathways would reduce customer friction and increase conversion rates.

Finally, integrating real-time data sources for identity checks—such as biometric data and behaviour analytics—will create a more holistic and secure verification ecosystem, ensuring not only compliance but also future-proof fraud prevention.