Lower risk = greater customer value
HDFC Banks mission to reduce credit card related risks
and fraud allows it to provide better value to its customers. Soutiman Das
Gupta has the details
C N Ram
Head, IT HDFC Bank
HDFC Banks move to reduce fraud related to credit cards was unique and
intelligent. It was unique because it was the first bank in the country to implement
a Proactive Risk Management (PRM) solution, and intelligent because it created
a truly win-win situation for its customers and the organisations business.
We presented HDFC Bank with the Intelligent Enterprise Award
2005 in the Banking category at the Technology Senate 2005, and C N Ram, Head,
Information Technology, HDFC Bank, accepted the trophy.
Innovation Provides The Edge
Banks have long been plagued by fraudulent use of credit
cards. There have been numerous instances of illegal transactions in many banks
worldwide which have resulted in loss of money and customer satisfaction,
This got the management at HDFC Bank looking for means to
counter the menace. In 2004, the bank decided to implement a PRM tool for its
The Needs Are Highlighted
The bank looked for a number of benefits from the PRM solution.
The primary objective was to reduce credit card related risks
and fraudulent practices in the bank. The other objective was to provide more
value to customers by sending an alert every time a suspect transaction was
made. This means that whenever there was a purchase of high-value, or
a transaction was carried out at a risk-prone merchant location, the cardholder
would be called on the phone or sent an e-mail, depending on the perceived risk,
to confirm the authenticity of the transaction, explains Ram.
Other Nominees In The Banking
- IDBI Bank's project for online payment
of direct taxes through the Internet with proper validation of PAN and
TAN of taxpayers.
- Yes Bank's strategic outsourcing of its
entire IT needs to a competent outsourcing service provider.
A Proactive Project
The bank chose to deploy a product called ACI Proactive Risk Manager for Debit
and Credit Card Fraud Detection. The project began in August 2004 along with
the use of other products such as server platforms, databases, and hardware
servers and switches.
The PRM solution is actually an online transaction monitoring system that works
on top of the credit card authorisation system. It interfaces with Base24 switch
software that runs on proprietary HP NonStop hardware. The transactions from
Base24 are sent in real-time to the queue in PRM by means of middleware.
The PRM can define customised rules or SQL statements to suit and identify fraud
trends specific to the credit card issuer. The system is scalable for multiple
products such as debit cards as well. The rules are executed online on the incoming
transactions and pooled into a common place from where the banks analyst
picks up alerts based on predefined priorities.
Any transaction that may be highly suspicious where the loss would
directly affect the customer is prioritised by the system. Prioritisation helps
the bank to proactively identify and avoid further fraud, and protect the customer
and the bank.
The total investment was Rs 1.10 crore, and the project was completed in four
Benefits To The Bank
The bank has derived a number of benefits from the PRM solution. It has been
able to cut losses due to risks and fraudulent practices related to credit cards
by around 30 percent. The lead-time for checking information from the credit
card holder has been reduced by around 60 percent.
The system brings up accurate historical information of customers when they
call with queries. This helps reduce the time taken for resolving issues.
We are proud to have won the Intelligent Enterprise
Award. It speaks a lot for the hard work that our organisation has done
for the benefit of the business and customers.
The analyst then sends an e-mail to customers for confirmation
of low priority alerts with the help of an integrated e-mail option. The contents
of the e-mail are entered automatically by the system. The mail has transaction
information which is dynamically derived from the account.
Our customers place more value on our services and are happier with us
than with any other bank. This is a significant addition to the goodwill of
the bank, says Ram.
The benefits of the new system have been felt by employees at the bank, and
more importantly by 700,000 customers nationwide. The bank has several stories
about the positive impact of the system on its customers.
The Unique Aspects
Beyond the benefits to the bank, there were a number of unique aspects to the
We were the first among the countrys private banks
to implement a process for online transaction monitoring to prevent fraud
We were the first among the countrys private banks
to implement this process of online transaction monitoring for fraud prevention.
We built a very robust and resilient IT infrastructure to handle the large volume
of daily transactions, says Ram.
When a transaction is identified as being fraudulent, the details are stored
in a separate table for analysis. The unique system then allows the bank to
perform statistical modelling based on the specific fraud trends.
Since the solution uses pre-defined rules and past transaction
patterns, the scope for fraud coverage is very large. Reviewers can take defensive
action to reduce potential losses very quickly.
Project: HDFC Bank's
Proactive Risk Management (PRM)
Date started: August
Date completed: December
Project cost: Rs 1.10
Reduce credit card related frauds and increase customer service by alerting
the customer on high-value transactions or transactions at risk-prone
The project, the first of its kind in India, monitors transactions online
with pre-defined rules and transaction history patterns to identify a
fraudulent practice. The bank has been able to cut losses by 30 percent.
Scaling & Modelling
In future as we add more customers we will scale the systems capabilities,
reveals Ram. This will help the bank to reduce losses further and create more
The bank plans to perform statistical modelling of transactions in order to
maintain the optimal transaction-to-alert ratio. It will also help to increase
the rate of fraud detection through the PRM solution to 60 percent from 40 percent
Additionally there will be provision in future to have alerts on SMS to reduce
the waiting time in queues.