Govt Collaborates With UPI Apps To Tackle Real-Time Payments Fraud
Central Initiative Targets TPAPs: Google Pay, Paytm, PhonePe
The Indian government is joining forces with third-party app providers (TPAPs) like Google Pay, PhonePe, and Paytm to strengthen security protocols and block suspicious transactions in real time.
- Purpose: This move is aimed at combating the surge in fraudulent transactions on UPI platforms, especially targeting users with low digital literacy.
Enhanced Transaction Monitoring & Delays
To implement these safeguards, the Centre is working on a system where all transactions—regardless of amount—are subjected to rigorous checks.
- TPAPs may introduce slight delays and issue fraud alerts or request additional confirmation from users before processing transactions flagged as potentially risky.
- These enhanced checks are intended to curb both peer-to-peer (P2P) and person-to-business (P2B) fraud, even if it means increasing transaction time by a few seconds.
AI-Powered Risk Detection
TPAPs such as Google Pay and PhonePe have adopted a risk-based approach, using artificial intelligence to classify users as medium, high, or very high financial risk and restrict/block transactions accordingly.
- This proactive measure aims to detect mule accounts—bank accounts used for illegal activities like money laundering or scams.
Rising Digital Payment Frauds in India
- Fraud Impact: India saw 6.32 lakh UPI payment fraud cases amounting to INR 485 Cr in the first six months of FY2024-25 alone.
- Growing Threat: Fraudsters are rapidly evolving methods, including fake interfaces to trick users into authorising transactions.
Government’s Broader Strategy
- Collaborative Response: The government is hopeful that this collaborative approach will lead to a robust solution to restrict UPI payment fraud.
- Previous Steps: The RBI’s innovation arm is also in talks with public and private sector banks to adopt AI-powered fraud detection—specifically for tracking and blocking mule accounts.
Global Comparisons
- US & Europe: Platforms like Zelle (US) and Revolut (UK/EU) use similar AI-driven transaction monitoring and real-time fraud alerts, but often require customer action or introduce delays for flagged payments.
- Singapore: The Monetary Authority of Singapore mandates two-factor authentication and “cooling-off” periods for new payees—practices now being considered by Indian regulators.
What To Expect Next
- User Awareness: Beyond technology, there will be increased focus on user education about fraud risks.
- Industry Impact: These changes could set a new standard for transaction safety across India’s booming fintech sector, aligning with international best practices.
In summary, India’s unified push—combining government, regulators, and fintech giants—signals a maturing digital payments ecosystem prioritising user safety without sacrificing innovation or convenience.
