How AI-backed Onboarding Solutions are Enabling Logistics Industry to Scale Faster and Prevent Fraud


Logistics businesses are susceptible to financial fraud due to the high transaction volumes. Even a slight compliance oversight can significantly impact the annual turnover and market share.

As per the Indian Logistics Industry Outlook 2020 report, the logistics market in India will grow at a CAGR of 10.5 percent between 2019 and 2025. Much of this growth will stem from disruption and development in related industries such as e-commerce, manufacturing, retail, healthcare, etc. The growth in these industries will be driven by investment in infrastructure, operational efficiency, digital systems, and data analytics. The policy support by the government, like the recent National Logistics Policy, will also play a part in accelerating growth.

However, the growth will not be without its challenges. As observed during the peak of the pandemic, the complexity of supply chain issues will continue to be a big hindrance to business growth. As logistics businesses navigate around the scarcity of resources, freight bottlenecks, high consumer demand, greater employee attrition, vendor movement, and subsequent frauds will be one of the largest obstacles that will continue to impact franchise partners, affecting their profitability and long-term growth

Third-Party Frauds: A Big Problem in Logistics?

To add speed and scalability to logistics operations, franchisees establish an extensive third-party network including vendors, distributors, delivery partners, etc. Running a franchise involves multiple stakeholders and most of them have access to high stocks of inventory and underlying assets. The unethical actions of one stakeholder can directly impact the entire business. Many of them also become touchpoints for obtaining licenses and permits from the government, increasing the risk of bribery and corruption. This burgeoning franchising system results in a significant rise in franchise frauds.

In many instances, franchisors get associated with the wrong partners and bear the consequences of reputational, regulatory, and financial damage to their business. Establishing a robust due diligence framework for 360-degree verification of third parties and building internal controls is a must before signing any partnership agreement.

Checks to Mitigate Frauds in Logistics Space

Logistics businesses are susceptible to financial fraud due to the high transaction volumes. Even a slight compliance oversight can significantly impact the annual turnover and market share.

There is a dire need for identity and background checks to onboard genuine vendors and third parties and prevent frauds associated with billing, inventory, misrepresentation of goods/services, money laundering, and sanctions violations. Without a robust verification technology and post-risk assessment, such frauds and identity thefts can go undetected for months or even years. To abide by regulatory mandates, it is crucial to conduct criminal background checks, FCPA compliance checks, financial checks, AML checks, address verification, KYC checks for international transactions, and reputational due diligence.

 Financial Checks: It includes bank account authenticity, GST verification, filings, payouts, or any active mortgage/satisfied charges. Determining authenticity parameters and cross-checking if the businesses you deal with are credible or not.

 Database Checks: Verifying partners/businesses with proprietary databases including court record database checks, crime watchlist checks, and criminal history checks.

 Reputational Checks: Reference checks for business identity/key account personnel and prevent association with wrong parties.

 Compliance Checks: Validating PF registration, ESIC registration, and GST taxpayer registration to stay compliant and save businesses from regulatory fines and illegal financial problems.

 Address Checks: Proof of address for identity verification of customers/business partners to comply with the Know Your Customer/Know Your Business (KYC/KYB) regulations, and prevent fraudulent activities, and double-dealing.

 KYC/AML Checks: KYC/AML checks are defined by regulatory bodies to ensure customers are real and stay secured during domestic/international money transactions. This will help identify and prevent money laundering, terrorism financing, and other illegal corruption schemes.

With detailed risk scoring and compliance reports based on these checks, businesses can take a decisive call on whether to onboard an entity or not.

Third-Party Onboarding To Meet Logistics Requirements

As a business expands, logistics operations are outsourced to third parties to streamline inbound and outbound logistics, reverse logistics, intra-organizational transportation, inventory management, and much more.

3PLs enable businesses to leverage new supply chains, improve customer service, and access new markets that have not been explored before. But this also means that a major part of their growth rests with them.

As the market is highly fragmented, the due diligence of the 3PL providers is critical to selecting the right one as a business partner. So when onboarding third-party logistics partners (3PLs), franchise owners should check reference aspects, linked associations, business model, financial standing, etc. to stay compliant for future audits.

Role of Automation and Digital Checks

Apart from all the checks for 360-degree due diligence, what’s essential is how fast the entire due diligence process is initiated and done. Because of growth and the rise in demand, companies need the fastest onboarding turnaround time to scale quickly. Even a slight delay can impact the customer experience, block the business growth, and eat into the profits.

Manual onboarding restricts businesses from scaling operations and leads to high turnaround time and communication hassles. Automating third-party verification is momentous to add speed and scalability to the process and prevent compliance failures.

Fastest Onboarding and Due Diligence with AI-Backed Solutions

Digital checks based on Aadhaar based e-sign technology, liveness detection, biometric identification, OCR, and digital address verification can enable businesses to conduct risk-based due diligence of suppliers, business partners, etc.

Voice-based authentication and liveness detection have a high success rate in validating individuals in real-time. Optical Character Recognition- OCR enables automated form filling, validates the authenticity of vendors and other third parties, and identifies stolen IDs/forged documents. GEO-tagging coordinates verify identity and physical address via user’s smartphones and scale-up verification. Access to platforms that can leverage cutting-edge technology to facilitate KYC/KYB checks can be a gamechanger.

Moreover, these technologies help logistics companies reduce the onboarding turnaround time and OPEX to a great extent. With technology upgradation in the onboarding process, businesses can maintain quality and delivery of the service, and stay ahead in the competitive sphere. Franchise owners must leverage AI-backed authentication solutions to enable process standardization, prevent identity thefts, and stay agile for modern demands.


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