UPI-based transactions, which have witnessed an over four-fold increase both in volume and value terms over the last two years, as well as an increase in the amount of frauds.   

UPI (Unified Payments Interface) is basically an instant real-time payment system developed by the 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 ₹2.1-lakh crore in value terms. NPCI data suggests that this increased to around 540 crore transactions, amounting to ₹9.6-lakh crore in value terms in March 2022.

Given the massive increase in transaction volumes on the UPI platform, industry watchers claim UPI fraud now accounts for most of the cyber fraud incidents, though numbers were hard to come by.

RBI data

According to data available in the 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 4,071, as against 3,499 reported in the same period last year.

However, the amount involved in such frauds declined to ₹36,342 crore (₹64,261 crore) during said period. The number of card or internet related frauds also increased marginally to 1,532, amounting to ₹60 crore during FY2022, as against around 1,247 frauds amounting to ₹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 involving card or online 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 secure architecture makes 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. 

Around 65-75 per cent of UPI frauds occur during peak business hours between 7 a.m. and 7 p.m. The average ticket size of such fraudulent transactions is typically low, with around 50 per cent of frauds being less than ₹10,000, while only one-to-two per cent of fraudulent transactions are ₹1 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, Agarwal 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.