Look Who's Watching

Dipak Mondal/Money Today | Print Edition: February 2013

An angry mail shot to your boss, a grumpy look after the appraisal or a sudden retreat from colleagues may put your employer on alert. The reason is simple. Such behaviour points at employee dissatisfaction, something which can make him commit a fraud.

More and more companies are now studying the behavioural patterns of employees and clients to prevent frauds and defaults.

So, whether you are a loan applicant, an insurance buyer, a mobile phone user or a job seeker, lenders, insurance companies and employers may use your conduct to analyse the risk that you can pose to them.

Here we discuss ways that can be used to study your behaviour if you are:

A Borrower:

The first thing a lender does is check the applicant's credit history. Lenders use credit reports from credit information companies to gauge the spending and repayment patterns of loan applicants to determine the likelihood of a future default.

"The credit information report contains the person's identity information, past and present credit obligations, including joint liabilities, earlier addresses and enquiries made by banks for previous loan applications," says Mohan Jayaraman, managing director, Experian Credit Information Company of India.

Apart from the initial checks, lenders also keep tabs on spending and repayment patterns even after the loan has been granted. This is especially true of credit card companies, which set a credit limit for their customers. Any spending beyond that is a trigger for the company to act.

"Though the customer is at liberty to utilise 100% credit limit, banks keep customers informed about transactions through SMSes and emails," says Anil Ramachandran, head, credit cards, IndusInd Bank.

"We send an SMS alert to cardholders as soon as they cross the 80% threshold," says Pallav Mohapatra, CEO, SBI Cards.

If a person reaches the credit limit, further usage is usually restricted till the time payment is made for the transactions done.

The cardholder has to pay a minimum amount, usually 5% of the bill, in every statement cycle. If he fails to do so, it's an indication of financial stress, in which case the card can be blocked for further transactions.

Though such daily tracking is difficult in case of other loans- home and personal- lenders put in place certain conditions to keep tabs on borrowers. For example, borrowers may have to notify lenders about changes in employment and residence (from NRI to resident) status.

"In case of home and personal loans, banks and non-banking finance companies typically use early warning indicators. For example, in loans for under-construction properties where the money becomes due in stages, banks can hold disbursals till all credit parameters are deemed to be satisfactory," says Arun Ramamurthy, cofounder, Credit Sudhaar, a credit health improvement company. Credit Sudhaar recently tied up with Credit Information Bureau of India Limited (CIBIL) to advise people with poor CIBIL credit score.

An Employee:

The KPMG India Fraud Survey 2012 says that employees (at both management and non-management levels) are the most likely to commit fraud after vendors and agents.

That is why companies need to have a mechanism to prevent malpractices by employees.

As mentioned earlier, a company may consider a disgruntled employee as a potential threat. But monitoring such employees is not easy.

"This remains a controversial issue on account of various factors- employees perceiving monitoring as invasion of privacy, the complexities involved in the process as well as the effectiveness of the process," says Rohit Mahajan, partner and co-head, forensic services, KPMG India.

Nonetheless, many organsiations nowadays have electronic monitoring systems to track the kind of information shared and public networks accessed by you, data stored in your desktop and personal storage devices and maintain log files containing details of applications used by you. These details can be analysed further if the company detects suspect behaviour.

"In some cases, the surveillance systems have access to employee phone conversations and voicemail messages," says Rohit Mahajan of KPMG.

According to KPMG, some corporate houses set threshold 'acceptable behaviour' to identify suspect conduct. For example, a large number of refunds or voids at a retail shop traced by the system can indicate fraud.

An Insurance Buyer:

The insurance industry, especially motor and health segments, is known to a big victim of frauds related to fake and inflated claims.

So far there is no system to check such frauds and insurers depend a lot on voluntary disclosures about medical history, location and age made by the buyer.

However, the Insurance and Regulatory Development Authority (Irda) is planning to build a fraud detection and prevention system to check fake and inflated claims. The proposed system will use data collected by the Insurance Information Bureau of Irda.

The system will involve better screening of policyholders, which means your claim, medical history and other details will be closely watched before you are sold a new policy. The findings will be used to price the policy as well.

"Insurance companies can use past record to decide the insurance premia while granting policies. This is the norm in most developed markets," says Arun Ramamurthy of Credit Sudhaar.

A shopaholic, a Foodie or a Movie buff:

You often eat outside, shop in big retail outlets or watch movies in expensive theatres. If you have given your phone number or email address in feedback forms at these places, it's likely that you will be reminded of every new offer by the retail outlet or the restaurant or every new movie release.

Have you ever wondered how an enquiry call to one telecom service provider leads to unsolicited calls from other service providers?

This is possible because of the referral arrangements companies have with one another.

Your telecom service provider may sell the data to insurance companies or the retail outlet you visit may pass on your information to a bank selling credit cards.

"Behavioural analysis can provide a fair indication of a person's behaviour in the future. In sales and marketing, one can determine customer preference based on past behaviour and then tweak the product/service to suit that. This is becoming common in the retail sector," says Rohit Mahajan of KPMG.

The popularity of electronic transactions, better data collecting tools and software to analyse and sort large data are helping companies track every move you are making as a consumer, employee or investor. Any malpractice or unwanted behaviour may land you in trouble. You better watch every move you make!

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