We continue our series on frictionless underwriting this week with a closer look at India’s rapidly changing environment and what it means for onboarding and monitoring merchants.

With the advent of rapid digitalization in India, the race has been on for payments providers to board many merchants quickly.

Companies have responded to the government’s aggressive moves toward a digital economy by announcing a slew of new initiatives intended to bring small merchants into the fold.

With that in mind, we asked Dan Frechtling, senior vice president, Marketing and Product Management, with G2 Web Services, if the speed at which things are changing in India has created an opening for fraudsters. G2 is a global provider of merchant onboarding and monitoring; the company works to identify cases of compliance violations and fraud.

“Obviously, demonetization was the big headline, but the government has been promoting ecommerce platforms, the rapid expansion of 3G and 4G, and the government’s fiber optic initiatives. There’s just a real acceleration in India that’s amazing to watch,” Frechtling said.

That acceleration has been good for Indian consumers and businesses in many ways, he said.

“There’s a lot of development that occurs with that, a lot of inclusion for merchants that may not have had access to markets both in India and outside India, so cross-border. And good opportunity for consumers in India to have access to products and services they wouldn’t have had before,” he said.

However, the news isn’t all good.

“Just like anything else that’s new, it’s attractive for fraudsters. It’s attractive for financial and other crimes that are facilitated through the online channel,” Frechtling said.

Frechtling shared examples about two online businesses that had recently tried to engage in illegal activity in India.

The first merchant registered a business selling apparel and crafts, but was actually selling prohibited pharmaceuticals. The nature of the front business, with its large catalog of products at a variety of price points and cross-border transactions that occurred around the clock, helped it to appear legitimate on the surface.

The second business also sold prohibited pharmaceuticals, and presented itself as a consulting company helping clients navigate India’s pharmaceutical regulations. In that case, the custom pricing helped hide the prohibited transactions.

Despite the businesses’ attempts to appear on the up-and-up, G2 was able to detect improper activity. Over a five-month period, Frechtling said, the company saw the apparel business register with five different acquirers, operating under three different names.

These examples demonstrate the ongoing need for payments companies to be especially vigilant, he said.

“It’s never enough to just look for risk and to conduct your due diligence at the onboarding or account origination or account creation. It’s never enough because fraudsters change their stripes. They’re tricky, and they’re cunning. They’ll look like one thing and end up being something completely different. And you only know what they’re really up to if you monitor, and you need to be monitoring on a regular basis, all the time,” he said.

Frechtling acknowledged that India’s rapidly changing environment means that companies must work hard to differentiate themselves.

“When you’re in a fast-moving market, the nature of things is that new competitors are jumping in.” Frechtling said. “That’s going to be a competitive endeavor. How are you going to win business? (For some companies), you talk about frictionless onboarding, and you offer services like that to attract merchants and to beat your competition by offering faster onboarding.”

The key for businesses that choose that path, he said, is balancing that competitive nature with risk mitigation tools as well.

“As much as you want to look at the revenue side and the right strategy for market share, you want to have the right strategy for risk mitigation,” he said.