Get full access to one story every week, and to summaries of all other stories. Just create a free account

The Unified Payments Interface (UPI), India’s real-time payments ecosystem, has become an unstoppable force. In December 2021 alone, it saw 4.5 billion transactions worth Rs 8,26,848 crore ($111 billion). But what happens when an unstoppable force meets an immovable object?

UPI’s popularity lies in the multiple payment flows it offers to its users. Users can scan a QR code to make a payment, send money to an UPI ID or a phone number, or send a ‘collect money’ request. But scamsters have weaponised the very things that make UPI so appealing, selling false stories to lure users into inadvertently sending money. Playbooks range from ‘ click to win cashback click to win cashback The Ken Cashbacks for all: Government splurges on BHIM, digital transactions Read more ’ and ‘scan QR code to receive payments’ to ‘call customer care executive from a number listed on the internet to report a problem’.

Payments app PhonePe, for instance, sees 90% of the frauds on its platform orchestrated via UPI, according to Anuj Bhansali, head of Trust and Safety at PhonePe. Only 7% is on cards, says Bhansali. Since PhonePe has the largest market share of UPI transactions, seeing nearly two billion transactions in November 2021, most of the frauds on its platform stem from UPI. The company did not reveal the proportion of fraud transactions on its platform.

Those in the payments industry estimate that each month, victims lose at least Rs 200 crore ($26.8 million). This is a drop in the ocean compared to the amount of money that courses through the system. But the racket is big enough to pose a headache for those whose job it is to tackle frauds—law enforcement agencies (LEAs), the Ministry of Home Affairs (MHA), banks, payments apps, and of course, National Payments Corporation of India ( NPCI NPCI The Ken NPCI, the god of many things Read more ), the retail payments body that runs UPI.

According to KVM Prasad, Hyderabad’s assistant commissioner of police for cybercrime, 80% of the complaints his cybercrime police station receives are UPI-related. “We are observing that over 50% of all financial frauds are done via UPI, as large numbers of people are using UPI,” adds a senior government executive. This executive and others quoted in the story requested anonymity as they aren’t authorised to speak to the media.

It’s a headache because for one, banks don’t recognise these scams as frauds. Users, though duped and gullible, are complicit. And two, the payments apps aren’t required to mandatorily report these scams to the NPCI. So, these scams and cheating cases aren’t captured in their entirety.

The senior government official quoted above says that about 80,000 frauds are reported each month.


Arundhati Ramanathan

Arundhati is interested in how people use money in the digital age and how new economies will take shape based on that interaction. She writes the newsletter Ka-Ching! every Thursday. She lives in Bengaluru and has spent 14 years reporting and writing on various subjects.

View Full Profile

Enter your email address to read this story

To read this, you’ll need to register for a free account which will also give you access to our stories and newsletters

Or use your email ID