In an era where the Unified Payments Interface (UPI) has become the backbone of India's digital economy, the rise in online scams has prompted a significant shift in security strategies, while indian banks are now planning to implement a new layer of protection to curb digital fraud. They've proposed a software-based prompt or warning message system to the National Payments Corporation of India (NPCI) and the Reserve Bank of India (RBI). This initiative aims to strike a delicate balance between preventing fraudulent activities and maintaining the smooth convenience of digital payments that millions of users have come to expect.
The Proposed YES NO Confirmation Model
The core of the banks' proposal is a confirmation prompt that would appear on a user's screen before a suspicious or high-risk UPI transfer is processed. Under this model, specifically for Peer-to-Peer (P2P) transactions, the payment app would seek explicit approval from the sender before the money is credited to the recipient's account. The system is designed with three possible outcomes based on the user's response. If the customer selects 'YES', the payment will be completed within seconds as usual. If the customer selects 'NO', the transaction will be immediately cancelled, preventing any potential loss. However, if the user provides no response at all, the money will still be transferred, but it will only be credited to the recipient's account after a delay of one hour, known as lagged credit.
Addressing RBI Concerns and the Lagged Credit Debate
This proposal comes as a response to a discussion paper released by the RBI, which suggested various measures to tackle fraud involving fake calls, coercion, and deep-fakes, while one of the RBI's suggestions was a mandatory one-hour delay for certain transactions. However, many banks are concerned that a blanket one-hour delay for all transactions above a certain threshold could Notably slow down the adoption of digital payments and potentially drive users back to cash transactions. By introducing the 'YES/NO' prompt, banks are offering an alternative that provides security without imposing a mandatory delay on every transaction. This approach ensures that only transactions flagged as suspicious face additional scrutiny.
Criteria for Flagging Suspicious Transactions
Rather than showing a prompt for every transaction exceeding 10,000, banks are suggesting that the alert should only appear when the system detects unusual behavior. This includes transactions made at odd hours, such as 2 AM, or payments being sent to an individual with whom the customer has no prior transaction history. Also, payments directed toward recently opened bank accounts, which are frequently used as 'money mules' in financial crimes, would also trigger the warning. While the initial discussions focused on a 10,000 limit, some banks have suggested that this threshold could eventually be increased to 20,000 or 25,000 after the system stabilizes.
The Scale of UPI and the Challenge of APP Fraud
66 billion per month. Even though transactions above 10,000 might only account for approximately 2 percent of the total volume, their absolute number remains high. Most of these frauds fall under the category of 'Authorized Push-Payment' (APP) fraud, where victims are manipulated into initiating and authorizing the transactions themselves. Senior banking officials have noted that the RBI is taking this issue very seriously and intends to release formal guidelines or draft rules soon, a topic that was recently discussed in meetings between the Deputy Governor and bank CEOs.
NPCI Concerns and the Growth of Digital Fraud
The NPCI, which oversees retail digital payment systems in India, has expressed its own concerns regarding 'lagged credit' and the potential friction it might introduce. The organization believes that India shouldn't simply mimic the systems of other countries, as Indian users have grown accustomed to a specific, high-speed digital payment experience. On top of that, experts point out that 'deferred credit' might not be effective against investment fraud schemes or mule accounts where both the sender and receiver are complicit in the crime. The proposed measures are currently limited to P2P transactions and don't apply to Merchant (P2M) payments. However, since many micro-merchants use savings accounts and QR codes for business, some of these P2P-style merchant transactions might still be affected. 6 lakh in 2021 to 28 lakh in 2025, with the total value of fraud skyrocketing from 551 crore to 22,931 crore during the same period.