UPI frauds: Rising cases can affect users' confidence in digital payments

Digital-payment transactions have demonstrated remarkable expansion over the past few years. However, unprecedented growth in this area in India has been accompanied by a surge in related frauds. The recent data shared by the Union Ministry of Finance before Parliament shows the monetary value of frauds related to Unified Payments Interface (UPI) rose to Rs 1,087 crore in 2023-24, an 89 per cent increase over the Rs 573 crore in 2022-23. Alarmingly, payment-fraud incidents also nearly doubled from 725,000 in 2022-23 to 1.34 million in 2023-24. In the first half of this financial year, India reported 632,000 cases of UPI frauds, involving Rs 485 crore. The numbers are concerning and could dent users’ confidence, affecting growth.

 

The volume of digital-payment transactions increased from 20.71 billion in 2017-18 to 187.37 billion in 2023-24 — at a compound annual growth rate (CAGR) of 44 per cent. Correspondingly, in the same period, the value of transactions grew from Rs 1,962 trillion to Rs 3,659 trillion — at a CAGR of 11 per cent. Further, transaction volumes reached around Rs 86.59 billion during the first five months this financial year, while the transaction value was at an impressive Rs 1,669 trillion. In this, UPI was the leading medium in the digital-payment ecosystem, enjoying a share of around 80 per cent of the total, and being the topmost choice for people making low-value payments. In this context, it is all the more important to safeguard payments and transactions. Several initiatives in the past were taken to check the growing number of digital frauds in the country, including multifactor authentication systems, daily transaction limits, and equipping UPI apps with encryption technology. National Payments Corporation of India (NPCI) has also been proactive in enhancing UPI security, offering an artificial intelligence-powered fraud-monitoring solution to banks to flag and decline fraudulent transactions. Besides, the central government also launched the National Cybercrime Reporting Portal in 2019 to report digital-payment frauds.

 

However, as technology continues to evolve, cybercriminals are also becoming more equipped to intrude into even the most sophisticated security measures. Phishing attacks, along with malware and spyware threats, have become more common. As UPI’s reach expands, including in overseas jurisdictions, it becomes important to raise awareness among users and make people more immune to fraud risks. Effective fraud management should involve real-time monitoring to balance risks and customer experience. At the same time, financial institutions like banks should strategically collaborate with technology firms offering new-age solutions in areas related to security, data privacy, and fraud-risk management. These firms capitalise on anti-fraud data analytics and leverage the power of artificial intelligence and advanced predictive modelling to detect security risks and fraud at various points along the digital-payment value chain and also to mitigate risks. India has become a pioneer in digital transactions, particularly low-value transactions, which has helped both consumers and small merchants with numerous associated benefits. Thus, frauds must be contained. Both NPCI and financial institutions must focus on improving technology and enhancing consumer awareness.