The Reserve Bank of India is recommending payment lags, verification system for senior citizens above 70 years, among other measures to counter digital payment frauds, writes Team B&C
Digital payments by consumers are witnessing an unprecedented growth in India. But the downside is that cyber frauds are on the rise too. In 2021, the National Cyber Crime Reporting Portal (NCRP) reported 2.6 lakh digital frauds valued at Rs 551 crore. By 2025, the number of frauds increased multifold to 28 lakh, while the losses to consumers amount to a whopping Rs 22,931 crore.
New measures for countering digital payment frauds are proposed by the Reserve Bank of India (RBI) in a discussion paper open to stakeholders for discussion. The paper emphasises the need for introducing extra layers of safeguards. The last date for submitting feedback is May 8.
The RBI has suggested four options to tackle digital frauds, viz. lagged credit for authorised push payments (APP) other than low value, additional authentication by trusted person for high-value transactions by vulnerable sections of society, only accounts with satisfactory additional review will be eligible to receive large credits and customer-induced controls.
It says that delaying transfer of funds from the victims account breaks the fraudster’s psychological control. The lag acts as an additional layer of defence and increases the window available for detection. On the other hand, implementing a lag system would require changes in the payment infrastructure of banks and in conflict with the core principle of immediacy of digital payments.
The suggestion paper points out that certain sections of the society, such as citizens above a certain age or differently-abled persons are particularly vulnerable to frauds. “Such frauds often involve impersonation of family members or the fabrication of urgent scenarios relating to medical, legal, or other emergencies. These targeted incidents frequently result in disproportionately higher financial losses, underscoring the need to consider enhanced protective measures for this customer segment, alongside sustained awareness initiatives.”
Additional authentication may be necessary for citizens above 70 years. The RBI has said the authenticator could be a trusted person designated by the vulnerable customer. The authentication could be for high-value transactions, above Rs 50,000. The paper mentions that 92% of frauds reported by the NCRP are above Rs 50,000.
The paper urges banks to strengthen the identification and prevention of fraudulent activities. Funds must be allowed to be credited only after proof of genuine activity. The proposed measures are looking at the experience of other countries such as Sweden, Singapore, Australia, etc. The paper discloses an urgent need to put in place systems and processes to address the issue of growing cyber scams. It says that, digital payments in India have expanded at an unprecedented pace, reflecting a structural shift in the manner in which individuals and businesses conduct financial transactions.
Transaction volumes have increased 38-fold, while transaction values have more than tripled. The compound annual growth rate (CAGR) of digital payments stands at approximately 53% and 13% in volume and value terms respectively.
India’s digital payments ecosystem is interoperable giving consumers the choice of switching between platforms and multiple payment options such as credit or debit cards. The ecosystem comprises Unified Payments Interface (UPI), Immediate Payment Service (IMPS), National Electronic Funds Transfer (NEFT), Real Time Gross Settlement (RTGS), mobile wallets, and net banking.
However, the potential of digital payments is impeded by complaints related to frauds. A typical fraud through digital payments may not involve technical compromise of systems, but mostly through manipulation of users through social engineering, coercion, or impersonation. Victims themselves initiate and authenticate transactions, leading to ‘Authorised Push-Payment (APP) frauds. And given the instantaneous nature of payments the scope for timely intervention and recovery of funds is limited.
Existing measures to strengthen the safety of digital payments include two-factor authentication devices and card tokenisation empowering cardholders to switch on- off and set transaction limits, etc. Banks are now using phone numbers that begin with the 1600 for calling customers for transactions or service-related calls. Any marketing or promotional calls must be made from numbers starting with 1400, for consumers to distinguish between legitimate and scam calls.
Rising frauds in digital payments
Digital payment transactions offer seamless and immediate services to a consumer. Unfortunately the increasing digital payments trend in India, is in tandem with scams and frauds. In 2021, the National Cyber Crime Reporting Portal (NCRP) reported 2.6 lakh frauds valued at Rs 551 crore. By 2025, the number of frauds increased multi-fold to 28 lakh, while the losses to consumers amounts to whopping Rs 22,931 crore.
According to the RBI frauds due to take-over of a customer’s account are now negligible. Most frauds in digital transactions are Authorised Push Payments or APP frauds which thrive in environments characterised by easy, and frictionless, payments wherein funds can be transferred instantaneously by customers (victims) with minimal effort before realising that they are being duped. Post-transaction remedies to recover such funds are limited, a defrauded consumer is often left with a few remedies and uncertain outcomes, which are time-consuming and have low recovery rates.
Further fraudsters are deploying various tactics, such as bogus call centres, deepfake-driven impersonation scams and mule account networks. Almost all sections of society especially the vulnerable groups such as senior citizens have fallen prey to such APP frauds.
