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Fraud incidents rising with surge in UPI transactions

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UPI frauds account for most of the cyber fraud incidents as transaction volumes on the platform has surged in the last few years

UPI-based transactions, which have witnessed over four-fold rise both in number and value terms over the last two years, have also been reportedly witnessing a surge in the number of frauds.   

UPI (Unified Payments Interface) is basically an instant real-time payment system developed by National Payments Corporation of India (NPCI) facilitating inter-bank peer-to-peer and person-to-merchant transactions.

As on March 2020, there were 125 crore UPI based transactions amounting to close to Rs 2.1 lakh crore in value terms. This increased to around 540 crore transactions amounting to Rs 9.6 lakh crore in value terms in March 2022, NPCI data suggests.

Given the huge increase in transaction volumes on the UPI platform, industry watchers say UPI frauds now account for most of the cyber fraud incidents, though numbers were hard to come by.

According to data available in Reserve Bank of India’s latest trend and progress report, during the period April-September 2021-22, the total number of frauds in various banking operations based on the date of reporting increased to 4071, as against 3499 reported in same period last year. However, the amount involved in such frauds declined to Rs 36,342 crore (Rs 64,261 crore) during said period. The number of card or internet related frauds also increased marginally to 1,532 amounting to Rs 60 crore during April-September 2022, as against around 1,247 frauds amounting to Rs 49 crore same period last year. 

“In terms of area of operations, an overwhelming majority of cases reported during 2020-21 in terms of number and amount involved related to advances, while frauds concerning card or internet transactions made up 34.6 per cent of the number of cases,” the RBI report said.

According to Manish Agrawal, Head – Credit Intelligence and Control, HDFC Bank, UPI’s simple and secured architecture make it “unique” and there is hardly any vulnerability in the system. The frauds happen due to the vulnerability in the minds of users which fraudsters take advantage of. 

Nearly 65-75 per cent of UPI frauds happen during peak business hours between 7AM and 7PM. The average ticket size of such fraudulent transactions are typically low with around 50 per cent of frauds being less than Rs 10,000, while only one-to-two per cent were transactions of Rs one lakh and above.

More than 60 per cent of UPI fraud victims are salaried individuals and nearly 75-85 per cent of the victims are in the age bracket of less than 45 years, he said.

Further, more than 50 per cent of UPI frauds are in metropolitan areas, while rural geographies account for less than seven per cent.

Agrawal said customers should not download third party apps for resolution of complaints; should not respond to or click unverified links sent by unknown persons/institutions through SMS/WhatsApp and should never share sensitive banking details such as UPI PIN, debit/credit card number, CVV etc.

Published on May 14, 2022

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