Not long ago, the markets in India were at an all-time high. The financial services sector was predicted to boom like never before, thanks to an expected pickup in credit. But then, the dream run hit a roadblock, and a multi-billion-dollar scam brought the markets down to its knees. The business interests of a well-known diamond brand were in the midst of controversy and the promoters were alleged to have swindled one of the biggest national banks in the country over a six-year period. The scam, which is likely to be the biggest bank fraud in India so far, resulted in overdue loans exceeding $1.77 billion. But this could have been stopped. In the aftermath of this scandal,experts have wondered if leveraging tools using technology could have prevented the fraud at this scale.

As per reports, numerous banking and financial institutions in India are not fully integrated with the Core Banking System (CBS) that could have easily detected the fraud as it processes daily banking transactions, including posting updates to accounts and other financial records. The software generates alerts for all undue activities, but media reports find that financial institutions and banks have almost taken a decade to integrate with CBS. This does not just includelarge public-sector banks, but many other financial institutionstoo continue to work on outdated softwareand are spending millions on regulations and compliance, but really have no plan in place for risk mitigation.

The future of banks seems to be completely algorithmic and brings together tons of data,using predictive analysis for generating financial services solutions as desired by individuals or corporates. This helps service providers to use real-time data to makebetter decisions on credit increasing flexibility and making the process more customer-centric. Then again, if banking is all algorithmic, what would happen to regulation, supervision and compliance?

Technology that deals with Regulations and Compliance – RegTech– is still at a nascent stage in India. However, it is already aiming to achieve digitization that would reduce the compliance cost to a bare minimum and help safeguard investors’ money that would prevent such scams in future. Taking the example of manual paper reporting alone, digitization can streamline the verification process and save crores through data extraction.