Page 58 - Banking Finance July 2025

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Payments competition could police

bank fraud across India

B ank frauds in India have tripled in value. But that's turns out that the bank account linked to 'amazon@pockets'
only because some of the cases reported previously
belongs to Ckjxh Fiddbh, which doesn't appear to be a real
were re-investigated and appeared in the new
data. More worrying than the surge in the amount, however, name.
Payment frauds happen everywhere. Brazil's PIX, which
is the rise in the number of payment scams over the past ranks alongside India's UPI as among the fastest-growing
couple of years. The solution lies in rewarding better accountto-account transfer systems worldwide, is notorious
security. for its 'PIX gangs.'
Most of the stealing from banks occurs the traditional way:
What makes India's case problematic is that scamsters have
via loans obtained with the help of forged documents or
learned to coexist alongside a vast digital identity database,
bribes. Customers, though, are increasingly at risk of being
a biometrics-based unique number and card through which
cheated when they make payments. According to the
1.4 billion people establish who they are. It hasn't stopped
central bank's latest annual report, more than half of frauds identity theft. India's banks are constantly bombarding
took place in digital or card-based transactions, even though customers with 'know-your-customer' checks, asking for the
they accounted for only 1.4% of the $4 billion in scams. same documents again and again. Yet, 'mules' continue to
And these are just the situations where the sums involved thrive. Accounts of unsuspecting customers are used by,
were Rs. 1 lakh ($1,160) or more. Thanks to a wildly popular among others, online bookmakers located overseas to
smartphone-based payments network, much smaller values provide illegal access to casinos and cricket betting via
are being exchanged online for person-to-person and cryptocurrencies.
person-to-merchant transactions. The so-called Unified
The Reserve Bank of India's innovation hub has come up
Payments Interface (UPI) is instantaneous, available 24/7 and
with an artificial-intelligence tool called MuleHunter.ai. It's
mostly imposes no cost on users. now building a prototype for an intelligence platform
It's logging more than a million cases of hustle and con covering all digital payments. However, it isn't enough to
annually, according to separate government data. And this merely identify suspicious transactions. As analysts have
is just what's getting reported. Unless they are extremely pointed out, the local money-laundering laws do not allow
careful, the more affluent depositors don't even come to banks to take prompt preventive action, or to restore funds
know that they're being slowly bled. to their rightful owners.
The growth of UPI, which handles more than $3 trillion a Critical sectors of the economy can't wait for legal changes.
year, puts enormous pressure on the system. It was bound The stock market regulator has decided to add a layer of
to attract criminals. Payment intermediaries have warned security to investment funds changing hands online. From
customers of the various ways- from simple phishing attacks October, a @valid suffix on virtual payment handles will be
to sophisticated cloning of SIM cards-in which they may fall mandatory for brokers, investment advisers, research
prey to swindlers. analysts, merchant bankers and mutual funds to collect
payments from investors.
Yet, the Indian banking system can't shrug off its
responsibility with a 'buyer beware.' It needs stronger guard- Banks will also heave a sigh of relief. Payment is a utility they
rails. Anyone can set up a virtual ID to ask customers for must offer depositors so they have funds to lend. Frauds are
money online. That freedom is welcome. But not when it a costly distraction. (Source: Mint)

52 | 2025 | JULY | BANKING FINANCE