Customer Liability in The Age of Digital Banking

Who is liable for money lost when fraud occurs in a customer’s bank account or card through illegal access/use of ATM or any of the Digital Channels (Internet Banking, Mobile Banking, Payments, E-wallets, etc.)?

The answer depends on the country where the account is being operated.

While the customer is responsible for the safe keeping of his/her ATM Card, Pin, Internet Banking and Mobile Banking credentials, different countries have different regulations on ‘limited liability’ of the customer.

When a customer discovers and reports fraud in her account through the use of ATM, Internet Banking or Mobile Banking, she is not liable for the full funds lost.

In the US, the Federal “Regulation E” Consumer Protection Act ensures that customer’s liability is capped at $50 if she contacts the financial institution within 2 days of discovering loss, theft or theft of the access device. The bank is liable for the rest of the money lost.

Many banks take account protection a step further with their banking guarantee and even waive the $50 liability given the fiercely competitive market.

As a result, banks take the entire responsibility for the loss. The UK too has similar consumer protection clauses for electronic banking transactions.

India’s central banking institution, the Reserve Bank of India (RBI) has been working on beefing up customer protection aspects of banking supervision for the past few years.

RBI’s recent communication to Indian banks on limited customer liability is laudable for its bold steps towards better customer service and protection in the Indian banking ecosystem.

It mandates banks to adopt better systems and processes to ensure safety and security of electronic transactions including the robust fraud detection and prevention mechanisms.

Some of the highlights in the communication:

Mandatory By Banks For All Digital Transactions

  • Registration of customers for text alerts and email wherever available, for electronic transactions.
  • Text alerts to customers for all electronic transactions and email alerts to customer registered email.
  • Ability for customer to report unauthorised transactions 24X7 through multiple channels (including website, phone banking, SMS, email, IVR, toll-free helpline, home branch).
  • Enable customers to instantly respond by Reply to text alert for unauthorised transactions.

Zero Liability of Customer

The customer has zero liability for the loss where unauthorised transaction occurs in case of:

  • Contributory fraud/negligence/deficiency on part of bank irrespective of whether the transaction is reported by the customer.
  • Third party breach, where the deficiency lies neither with the bank nor with the customer but lies elsewhere in the system and the customer notifies the bank within 3 working days of receiving the communication from the bank regarding the transaction.

Limited Liability of Customer

The customer has limited liability for the lost funds due to unauthorised transactions in the following cases:

  • Where loss is due to negligence of the customer, such as sharing payment credentials, the customer will bear the entire loss until customer reports the unauthroised transaction to the bank. Any loss occuring after customer reports unauthorised transaction should be borne by the bank.
  • Where the responsibility for the unauthorised electronic banking transaction lies neither with the bank nor with the customer, but lies elsewhere in the system and when there is a delay (of 4 to 7 working days after receiving the communication from the bank) on the part of the customer in notifying the bank of such a transaction, the per transaction liability of the customer shall be limited to the range of INR 5000 to INR 25,000 based on the type of the accounts and the average balance/credit limit.
  • Where the delay in reporting is beyond 7 working days, the customer liability shall be determined as per the bank’s Board approved policy.

Customer Liability – Summary

Time Taken To Report Fraudulent Transaction From Date Of Receiving The Communication Customer’s Liability (in INR)

Within 3 working days

Zero liability

Within 4 to 7 working days

The transaction value or the amount mentioned in Table 1, whichever is lower

Beyond 7 working days

As per the bank’s Board approved policy

Moreover, the bank should credit the amount involved in unauthorised transactions to the customer’s account within 10 working days from the date of reporting by the customer.

These measures will certainly take digital adoption to the next level for the Indian banking sector and the overall economy.

While banks must invest in the enabling technology and processes, the benefits of increased customer confidence in digital adoption far outweigh the enablement costs.

Role of Customer Analytics in transforming Customer Experience

How often do you visit your bank? Quite rarely, I suppose. Banks have come a long way since online banking was introduced way back in 1990s. Amidst strict banking regulations and slow economic growth, banks have strived hard and opened up to newer channels of communications that are aimed at providing ease of banking to customers. Mobile banking, for instance, has gained tremendous popularity within a few years of its inception. With these ever increasing customer-touch points over non-traditional channels, it has become imperative for banks to provide good customer experience across every transaction, irrespective of the medium. A recent research by Cisco indicates that consumers desire pervasive access to seamless banking services. So what exactly do banks offer to their customers to ensure great customer experience? Let’s have a look at some interesting facts about customer experience in banking:-

68% of consumers want streamlined interactions and communication from their bank

54% of consumers would like to receive real-time notifications that assisted with financial purchase decisions

55% of consumers believe that their banks still do not know enough to offer personalized services to them

Great customer experiences are created on the basis of good understanding of the customer and the delivery of the right message at the right time.  And this cannot be achieved without knowing what the customer actually wants in real-time. This is where the need for customer insights arises. Customer analytics can reveal deep insights about the customer that can not only help enhance customer’s experience but also prove to be highly beneficial for the growth of the bank’s business. While there are a host of software available in the market, true value-add can only be achieved with solutions that offer differentiated benefits in form of real-time insights and predictive analysis. But, how do predictive analysis and real-time insights help improve customer experiences?

Let’s take an example. Say you are an existing bank customer. You log on to online banking and transfer some money to a private builder. You next look up the ‘Loan’ section, go through the interest rates applicable and then log out. Since the bank has implemented an intelligent solution that sends real-time insights depending on customer behavior, the bank immediately senses your need and sends an SMS to you offering discounted rates on Home Loans. Isn’t this the kind of customer service you look forward to every time you transact with your bank?

Hence, employing a customer experience strategy in a bank without having customer analytics in place is incomplete in itself. A good customer analytics solution can not only benefit the bank in terms of improved customer loyalty but also help the bank steer way ahead of its competition.

–   By Tulika Sarkhel

Tulika is Assistant Manager-Marketing at CustomerXPs.  She can be reached at

CustomerXPs offers real-time, intelligent products that empower banks with instant insights enabling influenced outcomes of deeper customer engagement and fraud-free transactions.

Learn more about CustomerXPs Clari5

The Needle in the Haystack

On one of my many very boring trips recently, I stumbled upon an advertisement for a key finder in one of the magazines. For a moment, I thought it was a wonderful product and that I should be buying one of those, since I am notorious for my forgetfulness. To understand how this product worked, I read the short description that was mentioned below the product ad. It said that there would be a key chain to which the key has to be attached and a card (similar to a credit card) which has got a chip on it, that will lead you to the key, once you have misplaced it. And the note, further said that the card can be kept in the wallet so that it is not misplaced. Now, for someone who misplaces almost anything, finding the wallet itself would be a challenge. The challenge for me was that there were far too many things that I had to search through in my flat to find my keys or the wallet. If I could somehow bring my search area smaller, it would be much easier to find my missing stuff all the time.

 This kept me thinking for a few days and then I realized this is precisely the problem most banks encounter today. They just can’t find the wallet to find the key. The technology solutions of today have given banks the key finder but banks are yet to find the solution to finding the wallet. Once they find the wallet, finding the key is the easier task.

 Today’s business applications have given bank users so much choice that they have no idea what and where they have to be looking to sell to their customers. There is an overload of information on hundreds of applications that bank users have to go through to finally arrive at the right product to sell to the right customer and at the right time. The relevancy of the information is much more important than the quantum of information. In fact relevancy of information is ‘the’ most important tool in the days of IT and not the quantum of information a system can provide. This is precisely what has made Google what it is.

 Even before Google, there were many other search engines that could retrieve information within fraction of a second, but what made Google stand out from the rest was the relevancy of the information it was able to give user on each and every search made. Google did it with a very innovative algorithm (using back-links). Today’s banks require a tool which would revolutionize the industry the same way Google did to the World Wide Web – an application which brings relevancy to the forefront and takes data crunching to the back-ground.

 It requires an application which can filter out all the false-positive cases and irrelevant cases with a human-like intuition but without a human intervention. It requires an algorithm that not only captures any relevant information that comes its way, but eliminates all the irrelevant information that could come its way. As with Google and the World Wide Web, the trickier challenge is the latter. And the day we find algorithms which can do this, we would have found the next Google.

– By Michael Lawrence

Michael Lawrence is Implementation Lead – BAS at CustomerXPs. He can be reached at

CustomerXPs offers real-time, intelligent products that empower banks with instant insights enabling influenced outcomes of deeper customer engagement and fraud-free transactions.

Learn more about CustomerXPs Clari5

Customer taking control to combat potential fraud








                          Customer                                             Bank







By Manish Ranjan

Manish Ranjan is Software Engineer at CustomerXPs.

He can be reached at



CustomerXPs offers real-time, intelligent products that empower banks with instant insights enabling influenced outcomes of deeper customer engagement and fraud-free transactions.

Learn more about CustomerXPs Clari5