Major banks pause digital onboarding as mule account scams surge: Report

Core Viewpoint - Banks are reverting to physical verification processes for account openings to combat identity theft and mule accounts, marking a significant shift from their previous digital-first strategies [1][2][14]. Group 1: Industry Trends - Many banks are now requiring physical inspections and branch or home visits by relationship managers for clients wishing to open accounts online [1][14]. - This shift represents a U-turn for banks that had been digitizing services and streamlining procedures [2][14]. - The Reserve Bank of India (RBI) has imposed fines on banks for not adhering to strict KYC protocols, prompting tighter onboarding processes [9][12]. Group 2: Company Responses - ICICI Bank has halted its insta-account opening service, now only allowing salary accounts to be created digitally, while other accounts require an assisted process [3][15]. - HDFC Bank continues to onboard customers digitally but is investing in enhancing the security and robustness of its digital onboarding process [4][7][15]. - Banks are now instructed to open accounts only for customers within their locality, with provisions for those outside a specified radius [6][15]. Group 3: Fraud Prevention Measures - The increase in mule accounts has led to a tightening of online account onboarding services, with banks facing challenges in fully digitizing the process due to fraud risks [9][12][14]. - Instances of digital accounts being blocked due to high-volume transactions have been reported, necessitating customers to visit branches for resolution [10][11][15]. - Banks are increasingly requesting income documents from customers to verify they are not involved in fraudulent activities [11][15].