The Lost Nominee Gap: How alternative data can help reconnect rightful beneficiaries

A silent crisis is brewing in the Indian financial ecosystem, one that represents a dormant volcano of wealth. Across banks, insurance companies, and mutual fund houses, a staggering amount of capital lies unclaimed and not entering the economic cycle. 

Unclaimed deposits in scheduled commercial banks alone surged by 26% YoY to reach ₹78,213 crore. When combined with unclaimed insurance proceeds, unpaid dividends and mutual fund redemptions, the total figure exceeds Rs 1.84 lakh crore.   

It’s more than just a statistical anomaly and must be defined as the ‘Lost Nominee Gap’. It exists not because money has vanished but because the bridge between the asset and its rightful heir has crumbled. Behind these numbers are grieving families, life savings meant for safety nets, and capital that can fuel the nation’s growth. This brings us to the million-dollar question: Why are these funds lying unclaimed?

The failure of ‘frozen data’

Traditional financial institutions often rely on data captured at the time of account opening, which could have been decades ago. An address provided in 1995 would still remain the primary point of contact, even though the account holder has relocated addresses multiple times or has passed away without updating their KYC details. 

This communication breakdown means that the funds are now moved to the Depositor Education and Awareness (DEA) Fund, or the Investor Education and Protection Fund (IEPF). At this stage, the burden of proof shifts to the beneficiary, who may not even know these funds exist. 

In mutual funds, for example, unclaimed redemptions and dividends amounted to ₹3,452 crore, primarily due to outdated contact details. While platforms like the RBI’s UDGAM (Unclaimed Deposits – Gateway to Access Information) portal have made significant strides in helping users search for forgotten wealth, the process remains largely reactive.

Alternative and secured data can piece together digital breadcrumbs

Bridging the Lost Nominee Gap requires the BFSI industry to transition from a reactive ‘hide and seek’ model to a proactive ‘consent and connect’ framework. This is where alternative data, processed through secure, consent-based architecture, comes in handy. 

In this context, alternative data is nothing but the dynamic, digital footprint, which offers a more accurate, real-time picture of an individual’s life and relationships that go beyond static paperwork. By leveraging India’s robust Digital Public Infrastructure, financial institutions can reconnect lost beneficiaries with unclaimed funds through several consent-based channels. 

First is telecom and utility data. While physical addresses change, digital identifiers like mobile numbers and LPG connections are often linked to family clusters. These can serve as critical digital breadcrumbs aiding the process of tracing the accurate location of the nominees. 

Second is observing transaction patterns. High-velocity payment histories and digital spending habits can help verify familial relationships and verify identities more accurately than outdated physical records. 

Third is cross referencing unified registries and DigiLocker. Data silos are the silent killer of financial legacy. Dismantling fragmented data and establishing a cross-sector ‘single source of truth’ can help synchronise disparate records. For instance, linking insurance beneficiaries with banking KYC. This interoperability ensures that a nominee, whose data is updated in one corner of the financial world, doesn’t remain a ghost to another.  

These tactics call for a comprehensive and unified technology platform that can ensure lost nominees are traced while also ensuring that personally identifiable information is protected and is in compliance with the DPDP (Digital Personal Data Protection) Act. 

However, financial institutions must remember that connecting digital breadcrumbs calls for leveraging personal data that needs to be protected. Because trust is the currency in a digital economy. As financial institutions embrace advanced tracing methods, the personal data of millions of beneficiaries must be protected and the technologies they leverage must comply with the DPDP Act. The use of alternative data must never be about intrusive surveillance. It must be about utilising existing, consent-driven frameworks to fulfill a moral and financial obligation.

Redefining financial inclusion

For too long, the industry has defined financial inclusion solely as the act of opening new accounts. However, true inclusion involves ‘financial integrity’, or the assurance that value stored within those accounts actually reaches the people it was meant to protect.

By bridging the Lost Nominee Gap with alternative data, financial institutions will be doing more than merely moving numbers on a ledger. They will ensure that the hard-earned savings of a previous generation provide the intended safety net for the next. It is time to move beyond frozen data and leverage the right digital tools to reconnect families with their rightful legacy.

The author is CEO, Neokred, a fintech infrastructure provider.