In a move to strengthen security across India’s booming digital payments ecosystem, the government is working with third-party UPI apps such as Google Pay, PhonePe, and Paytm to block fraudulent transactions in real time. The collaboration seeks to implement safeguards that can flag, delay, or even stop suspicious peer-to-peer (P2P) and person-to-business (P2B) transactions before money changes hands.
According to a report by Business Standard, platforms may soon introduce intentional processing delays, issue real-time fraud alerts, and require additional user confirmation if a transaction raises red flags. These measures aim to protect users, especially those with lower digital literacy, who are more vulnerable to scams.
AI-based risk detection and user profiling
Under the initiative, leading UPI platforms are deploying AI to monitor user behaviour, build risk profiles, and classify users into financial risk categories. Based on these classifications—medium, high, or very high risk—platforms can selectively block or delay transactions.
An official from the IT ministry noted that the government is optimistic about finding a concrete solution to reduce digital payment frauds, even if it marginally increases transaction time. A senior executive from a third-party app provider (TPAP) confirmed the use of AI-generated signals to flag risky transactions.
Surge in UPI scams raises urgency
The partnership comes amid a steep rise in UPI-related fraud. According to official data, India recorded 6.32 lakh UPI fraud cases in the first six months of FY2024-25, amounting to ₹485 crore in losses. With mobile-first users increasingly targeted through fake interfaces and scam calls, the urgency to embed better transaction oversight has grown.
Also read: Super.money Records 175M UPI Transactions
Digital frauds are also becoming more sophisticated, using deceptive QR codes, phishing messages, and malware to trick users into unauthorised payments. As India’s digital economy expands, the gap between access and safety continues to widen.
Broader efforts to reduce systemic fraud
This initiative complements other anti-fraud programmes led by the government and the Reserve Bank of India (RBI). The RBI’s innovation unit is working with public and private banks to deploy an AI-based platform that detects mule accounts—bank accounts used for money laundering and fraud.
While full-scale implementation of real-time fraud detection measures may take time, officials believe these efforts will substantially reduce financial losses and restore public confidence in digital transactions.
