Recently, the Reserve Bank of India (RBI) imposed a ban on Bank of Baroda’s mobile banking app, BoB World. But why did this happen, and what can we learn from it? Let’s dive into the details.
This unsettling issue involved a series of events that led to fraudulent actions by some of the bank’s agents, who secretly and unethically siphoned away ₹22 lakhs from 362 customer accounts. The impacted customers were unaware that their accounts were linked to the bank’s mobile app. What led to this scandal was seemingly innocuous: The bank simply set up some goals for frontline staff to drive digital banking adoption — banks do this quite often; sometimes, they set up sales goals for new accounts. Does this sound familiar?
Why, in some of these cases, do we end up with fraud on our hands? Here’s what we believe caused this to happen in BoB’s case:
- Unrealistic goals. Imposing unrealistic targets on frontline bank employees forced them to look for shortcuts as the bank asked its employees to sign up a certain minimum number of accounts on the bank’s mobile app.
- Lack of internal controls. Inadequate internal controls and monitoring systems allowed the bank’s junior-level officers to greenlight fraudulent approaches. For example, they allowed registering of the same mobile number with multiple bank accounts. In some cases, the numbers ran up to hundreds of accounts per mobile number.
- Technological safeguards. Outdated or inadequately implemented technological safeguards made the bank’s systems sitting ducks for exploitation. For example, the bank’s tech allowed its operators to update mobile numbers directly in the back end.
Upon discovering the issue, the bank initiated an internal audit and suspended staff involved in the scandal. The RBI took notice and asked the bank to undergo a cleanup before resuming new registrations on the mobile app. This is not the first time that overly ambitious goals have backfired and caused a scandal. This fraud is eerily similar to the Wells Fargo bank scam in the United States, in which employees opened fake accounts and falsified signatures to achieve sales goals — upper management then covered it up, which further led to stealing money from such accounts.
While heads may roll, and this scandal might or might not disrupt business as usual, this should be a moment for all banks to pause and reflect on the importance of having the right protections and checks in place. Is the banking sector sitting on a ticking time bomb? Are there more gray areas that need attention before another scandal emerges?
What is glaringly obvious is that banks must do more than simply punish the offending employees or strengthen the internal audit processes. They must:
- Create a culture that promotes healthy competition, as opposed to a mad dash to meet certain targets.
- Teach employees to respect their customers’ privacy and other rights.
- Make a more comprehensive approach to educate and help less digital-savvy customers adopt digital channels — such relationships will be long-lasting.
It may be easier said than done in a highly competitive landscape such as in India. But the alternative is worse: Losing the trust and respect of customers will cause more long-term damage to the bank’s brand than missing a few operational goals.
Why does this matter? In the end, it is the customers’ trust that drives revenue.
As we reflect on this situation, it serves as a reminder that even the best products can be undermined by back-end issues (note that, in 2021, BoB World was recognized as the best digital banking product by The Economic Times). So what do you think? Is your bank’s mobile app as secure and ethical as it should be? It is time for digital leaders in banking to assess the quality of their mobile banking app functionality. Our clients can download this assessment tool to gauge the quality of their mobile banking app functionality and the actions that they can take to improve it.
Also, check out our report, The APAC Financial Services Customer Trust Index, 2022: Banks. This report provides data and insights that digital leaders need to not only assess customer trust but also understand how to earn it through prioritized initiatives that drive revenue growth.