Is RBI's digital payments intelligence platform future of secure transactions?

In today's fast-growing world, everything comes to your doorstep with just a tap of a button on your digital device. Need to check your bank balance, or make a quick payment to your friend or business client? Your bank is at your service with a single tap. Craving for your favourite dish on a weekend? Your food order is at your doorstep with one swipe. Planning to go on a trip with your friends or family to your favourite destination? Fret not, your ride is a few seconds away with just a booking. All these services are now available with just a click on your digital device. Thanks to digitisation for making the impossible into a happening reality.

Upsides and downsides of digitisation

As per the National Informatics Centre records, the UPI transactions in India have increased from Rs 67 billion in 2015 to Rs 83.75 billion in 2023. These stats demonstrate a healthy spike in UPI users in India, resulting in bridging the digital divide. Unarguably, for almost a decade now (2015-2023), India witnessed a sea change in the way people transact and operate money across borders.

From the emergence of the Digital India mission on July 1, 2015, to date, the financial contribution and support from the local and central government has been substantially thumping. The spike in smartphone users and affordable internet led to the acceleration of digital adoption in India, resulting in lessening the gap between the government and the public, aiming to transform lives and making things easily accessible like never before.

People understood the power of digitisation during the Covid-19 pandemic. The entire world was hit by a deleterious wave, where people grappled in pain to save lives. During such unprecedented conditions, where lockdowns were a stern norm in place, digitisation came to the rescue, giving people a beacon of hope and enabling remote work and online operations as the new normal while simultaneously keeping everyone connected.

Yet, as they say, every coin has two sides, so does digitisation too. On one hand, the Indian government is working hard to strengthen the core foundation of the digital infrastructure, but on the other hand, online frauds are snowballing at a faster rate. Although digitisation made lives a living haven, this ease-peasy payment mode opened the doors to scams and frauds, causing risk of safety for people's hard-earned savings.

If you are oblivious to the kinds of online scams, here are a few that you must know to protect yourself from online attacks from grifters.

1) Phishing: People receive several banking and financial updates from banks and other financial institutions regularly. But what is the integrity of those messages? Are all the messages coming from the same financial channel? In this busy world, identifying the trueness of every text or link from banks or financial institutions can be tedious. Fraudsters take this situation as an advantage, they send you similar banking messages with fake links. They don't seem unreal, but when you click them, they'll take you to fake landing pages asking you to fill in your personal banking and financial information to proceed with your process request. This hitherto unknown activity could lead to the risk of losing all your money in a flash.

2) QR code fraud: Digital payments in India have skyrocketed in leaps and bounds, reaching 131 billion UPI transactions in FY24 alone, according to the Finance Minister of India. Despite the smooth digital payment channels, the fraudsters still made their way into the digital accounts of the customers via UPI QR codes. Since it's not easy to identify the credibility of a QR code, these fraudsters capitalize on this weakness and use it to siphon all your savings with just a simple QR code scan. As per the latest RBI reports, the UPI frauds rose from 9,046 in 2022-23 to 36,075 in 2023-2024. To be on the safer side, don't scan any obscure QR codes that come on your emails or social media handles though they create any urgency in the name of social aid, medical emergency or donations, etc. People end up as prey to fraud due to a lack of financial literacy and know-how. Yet, RBI is driving campaigns to edify peoples' financial literacy and keep them informed about financial fraud.

3) UPI fraud: There are millions of ads that run online every day, and not every ad is directed to make a sale out of your click. Some are fake ads too that look very attractive, mimicking your favourite brand, and propel you to click and check out their products. That's when you get caught in the net of swindlers and fraudsters. These fake portals will coax you into buying a product that never existed in the first place. And the next moment after the sale, you see all your money from your account getting deducted in multiples.

4) Fake OTPs: One Time Password or OTP is one of the many ways to secure digital transactions. But woefully, if you look at the digital fraud stats, "Fake OTP Fraud" stands as the most common technique by fraudsters to carry out online scams. Those who are novel to the online world get easily trapped by these parlour tricks. OTP fraud can happen in several ways like executing an OTP request via call or email or SMS, fake software links, mobile hacks, etc.

Immediate need for improved digital security

Digitisation became the heart and soul of the financial system. Not only was it empowered to push the spending limits of the people, but also unlocked solutions for myriad financial hurdles. The digital payment landscape has revolutionized the way financial transactions happen in the market. However, the accelerating growth in digital adoption has left some loose gaps in the financial space. Even the pandemic has pushed financial enterprises to bring about swift immediate solutions amid the crisis via a shortcut route. This leniency in digital security led to soaring frauds and scams such as phishing, malware attacks, fake OTP frauds, and UPI frauds.

In a thriving world, weaker digital security can obstruct the free flow of payments, leading to radical destruction in diverse sectors and the economy at large. Since the payment players are in multiples, the competition and pressure to capture big markets, particularly like India, is unquestionably real. When it comes to personal and financial data, people expect "utmost security", and in this digital world, this is utterly impossible but can be attainable through stern regulations and government support.

According to an official press release, digital payments stand at 11,660 crore in terms of volume as of December 2023. This considerable number explains the progress in the digital payment systems in India. Now where do we stand in terms of security in the digital payment landscape is a big question that needs to be addressed by the payment aggregators and other digital payment managing authorities like RBI and NPCI. As per the latest records, it was found that Aadhar-enabled digital payments accounted for 11% of financial frauds in 2023. Besides, the evolution of Artificial Intelligence (AI) has created a positive buzz in the world, which will soon likely take over major banking operations, serving as a one-stop solution for all personalised banking services with just a tap. However, this inimitable technology has also brought in knocking additional threats to the financial system. While digital platforms are embracing AI's dominance, simplifying financial channels, this technology has trapped several banks, posing new risks to customers' funds.

A Rs 820-crore UCO bank scam that happened in May 2024, is a classic case that explains the frail digital security in India. The UCO bank received deposits from 14,600 bank accounts of seven private banks via IMPS inward transactions to 41,000 UCO bank accounts without any debits from their accounts, accounting to 820 crore. Yet, later it was made clear that these wrongful transactions happened due to the bank's technical glitch.

As we live in this current digital era, where money travels borders faster than light, customers expect robust security for their funds. RBI has been educating the bankers and the public by conducting seminars, workshops, conferences, and campaigns. Case-in-point, "RBI Kehta Hai…Jaankar Baniye, Satark Rahiye!", one of the awareness campaigns by the Reserve Bank of India, educates the masses on cyber frauds and various financial and banking regulations via TV commercials, digital ads, etc.

The Digital Personal Data Protection Bill (DPDP) is another key initiative by the central government of India to boost the digital security levels of online transactions. The aim of the act/bill is to protect the personal data of the customers processing their financial payments online. The bill drafted a set of guidelines that need to be followed by any party upon data collection. As per the bill, if any data gets shared without the consent of the respective individual is considered a felony.

To narrow the cyber attacks, the RBI further came up with a new "Digital Payments Intelligence Platform", to give a strapping push to digital payments and uplift customers' overall trust in banking. So, what does this platform have to offer to the public? How does it work?

RBI's new digital payments intelligence platform combats digital fraud

In the course of time, the Reserve Bank of India (RBI) has proposed and incorporated several measures and stern regulations to cut down the cyber attacks in the realm of digital payments. To take digital security to the next level, the RBI introduced the Digital Payments Intelligence Platform - a way to enhance the strength of digital payments in India. This platform is headed and chaired by Shri A.P. Hota, former MD & CEO, of NPCI.

According to the RBI reports, over the six months till the end of March 2024, the domestic payment frauds escalated by 70.64% to Rs Rs 2,604 crore against Rs 1,526 crore in the corresponding period last year. The volume of online scams surged substantially over the six months till the end of March 2024 to 15.51 lakh as opposed to 11.5 lakh in the same timeframe in the previous year. India has been witnessing this considerable spike in fraud rates since UPI adoption in 2016 due to a lack of proper security integrations into the banking systems and other alterations in the digital landscape.

Over the last two years, the UPI payments reached Rs 200-lakh crores, resulting in a 137% spike in cashless transactions. As India already embraced UPI as a part of their financial system, there's a high need for a secured platform that protects hard-earned deposits and savings of the public. The accelerating cyber frauds should be alleviated through a system-wide approach, says the RBI Governor Shaktikanta Das, hence, the establishment of this new platform for network-level intelligence and real-time data sharing throughout the digital realm.

To curtail digital fraud, RBI raised the single rupee term deposit limit from 2 Crore to 3 Crore for commercial banks, and a single rupee term deposit of 1 Crore and above for Regional Rural Banks. Furthermore, the RBI also incorporated an e-mandate auto-replenishment facility for online transactions between customers and merchants. This allows customers to have control over their online payments and keeps them aware of their financial transactions.

How RBI's digital payments intelligence platform benefits customers and financial entities?

RBI has been on a roll, proposing myriad regulatory measures to bolster the digital payment landscape. The aim of RBI's digital payments intelligence platform is to be a security bridge between customers, banks, and financial and non-financial entities. However, the big question here is how this new platform is going to benefit financial organisations, stakeholders, and customers.

1) Heightened security: The prime focus for any financial entity, whether online or offline, should be security and convenience. Meeting these two basic aspects should be every financial entity's foremost job on their daily checklist. The surge in UPI payments and significant growth in the usage of digital wallets exhibits the reality of future digital adoption. As India is moving towards a cashless economy, having stern regulations and heightened digital security is pivotal. RBI's Digital Payments Intelligence Platform offers just that and more to both financial organisations and customers.

2) Detects frauds swiftly: Cyber frauds have been skyrocketing for a very long time now, however, financial entities can use RBI's intelligence platform as leverage to track and monitor digital frauds and address them swiftly.

3) Regulatory adherence: The platform will act as a fact checker to banks and payment aggregators, ensuring that all the transactions are happening smoothly with regulatory checks.

4) Automation and efficiency: The evolution of Artificial Intelligence (AI) has transformed the digital landscape and the way people transact online. However, despite having the automation process in place, human intervention is important to ensure the accuracy of financial transactions. RBI's new platform gets the job done by doing manual checks and real-time monitoring of all financial transactions to spot and curtail fraudulent activities online.

5) Boosts transparency and trust: Unarguably, the digital space is a bit scary to operate and transact. Though the digital walls are protected with robust infrastructure, with a further push by AI, reducing queuing time, at the end of the day, customers look out for transparency, which subsequently leads to boosting trust. RBI's new platform aids both financial entities and customers in achieving such an experience.

Future of secure digital transactions

UPI isn't just about digital payments, but there's more than what meets the eye. For instance, credit card usage has been snowballing to Rs 18.26 trillion in FY24, resulting in a 27% growth in customer spending via this facility. The launch of RuPay Credit Card on UPI by NPCI was a game changer in 2023. Customers can simply integrate their RuPay credit card to any UPI app and make instantaneous payments via a simple QR code scan. To make any payment to the merchant, all you need to do is simply connect the credit card to the UPI app, scan the merchant QR code, add the amount in figures, select RuPay Credit Card as a mode of payment, enter the UPI pin, and make the final payment. Digital Payment apps like Pay Later, Zest Money, PostPe, and a few others, are expanding their reach, going beyond local cities and capturing the bigger markets.

Digital wallets have garnered substantial popularity, making UPI apps like Google Pay, PhonePe, and Paytm, the future of digital transactions. Moreover, the introduction of UPI Lite has simplified small-value transactions. Say, you want to send Rs 500 to your friend or a colleague, you can simply pay without the UPI pin. However, the max cap limit for UPI Lite is Rs 4000/ day and the max balance one can hold in the UPI Lite wallet is Rs 2000 only. Such transitions in the digital space make peoples' lives easier and more flexible.

Furthermore, the integration of Blockchain Technology in the digital space can upgrade the security levels for digital payments. This technology runs through a decentralised system, however, ensures transparency for all the cross-border digital payments. The emergence of tokenization in the blockchain realm also aids in fighting cyber fraud. This deployment converts the sensitive data into tokens, making it easily tradable with enhanced security without the fret of data loss for the people. Even authorities like SEBI and RBI welcomed this new tool since the inclusion of digitization into the fintech space.

Despite an affirmative overview, RBI, the powerhouse of all the banks in India, should unlock the full potential of various AI and Blockchain tools and synergize and integrate them into the system to witness exponential growth in digital payments. Apart from that, the government should take the initiative to conduct campaigns and events that educate the public on cyber fraud and available resources to secure their financial health.