India’s Payment System: A Double-Edged Sword

The Unified Payments Interface (UPI) has revolutionized the way Indians make transactions. Since its launch in 2016, it has become the most popular mode of payment in the country. But with its growing popularity, scammers have also found a new playground.

The Convenience of UPI

Arun Kumar, a fruit vendor in Mumbai, can’t agree more. He has been using UPI for the past four years, and it has made his life smoother. “Earlier, everything was in cash. But now everyone pays with UPI. Scan the code and the payment is done within seconds. No issues of handling cash, giving change to customers,” he says.

UPI’s ease of use and convenience have made it a favorite among Indians. It’s free, and there’s no need to enter bank details or any other personal information. No wonder India has become the biggest real-time payments market, with 14 billion transactions recorded in May alone.

A street vendor uses UPI to accept payment from a customer

The Dark Side of UPI

But with great convenience comes great risk. Scammers have found ways to trick people into sharing their UPI pin number, which is needed to authorize payments. They create fake UPI apps that are clones of legitimate banking apps, and then steal login details or other valuable information.

“As the pace of digital transformation accelerated, digital literacy and safe internet practices couldn’t catch up,” says Shashank Shekhar, founder of the Delhi-based Future Crime Research Foundation. According to government figures, there were more than 95,000 cases of fraud involving UPI in the financial year ending April 2023, up from 77,000 in the previous year.

A Victim’s Story

Shivkali, a 22-year-old from Bihar, was one such victim. She had always wanted to own a scooter, but they were beyond her budget. She spotted one for sale on Facebook that looked like a great deal. She grabbed the opportunity without thinking, and eventually ended up paying $200, but the scooter was never delivered.

“I did not think I could be cheated, as I have some education background and know what is happening in the world. But scammers are smart. They have an art of speaking to convince the opposite person,” she says.

A scooter, similar to the one Shivkali wanted to buy

The Challenge Ahead

The government and the central bank are looking for ways to protect UPI users from scammers. But the problem is deep-rooted. “The onus lies with banks and telecom companies. They are lax in making identity checks, that’s why the fraudster can’t be traced,” says Dr. Durgesh Pandey, an expert in financial crime.

Despite the challenges, UPI is being promoted in rural areas where access to banking services can be difficult. Poonam Untwal from Rajasthan runs a guidance centre that helps people use the internet and digital banking. “Most of us are not that educated, nor know the proper use of smartphones. I teach them that phones are no longer a device just to talk to people but banks at their fingertips,” she says.

A rural area in India, where access to banking services can be difficult

The Future of UPI

As UPI spreads its wings, it’s not just limited to India. Retailers in Bhutan, Mauritius, Nepal, Singapore, Sri Lanka, and the UAE will take UPI payments. And this year, France became the first European country to accept UPI payments, starting with tickets to the Eiffel Tower.

As I conclude, I can’t help but think of the double-edged sword that UPI has become. While it has made transactions convenient, it has also opened up new avenues for scammers. The key to unlocking its full potential lies in striking a balance between convenience and security.

The Eiffel Tower, where UPI payments are now accepted