A recent LocalCircles survey reveals that one in five Indian families using Unified Payments Interface (UPI) has fallen victim to digital payment fraud at least once in the past three years. Half of these victims reported their UPI PIN or app settings were hacked, while 40% lost money after clicking on fraudulent payment links.
Despite the availability of grievance redressal mechanisms, over 51% of victims did not report the fraud, indicating significant underreporting.
In response, the Reserve Bank of India (RBI), National Payments Corporation of India (NPCI), and Ministry of Finance have introduced new security measures, including AI-powered fraud detection tools and a mandate effective June 30, 2025, requiring UPI apps to display only bank-registered beneficiary names to curb scams.
UPI Fraud on the Rise: The Numbers and Human Impact
The LocalCircles survey, conducted from March to June 2025 with over 32,000 respondents across 365 districts, found that 20% of families using UPI experienced fraud since 2022. Among those affected, 50% said their UPI PIN or settings were hacked, enabling unauthorised transactions, while 40% lost money after clicking on fraudulent payment links shared via SMS, WhatsApp, or social media.
Many victims reported multiple types of fraud, including QR code scams and phishing calls impersonating bank officials.
Despite the existence of complaint platforms like the National Cybercrime Reporting Portal and helpline 1930, more than half of victims did not file complaints, citing lack of awareness, cumbersome processes, or lack of faith in grievance redressal. The RBI’s latest annual report notes that digital payment frauds, including UPI, accounted for 56.5% of all banking frauds in FY25, with losses totaling ₹520 crore.
Expert Advice: Staying Safe in the Digital Payment Era
Security experts urge a combined approach of technology, regulation, and user vigilance to combat UPI fraud. Banks are advised to enhance onboarding via Aadhaar-based eKYC and intelligent profiling to detect suspicious accounts early. Real-time AI-driven transaction monitoring and risk scoring can flag dubious activities promptly.
Experts recommend users never share UPI PINs or OTPs, avoid transacting on public Wi-Fi, and download UPI apps only from official sources. In case of suspected fraud, users should immediately freeze accounts, change PINs, and report incidents through official channels. Public awareness campaigns and simplified complaint processes, especially in rural areas, are vital to empower users and restore trust.
Regulatory Measures and New Safeguards from June 30, 2025
UPI now accounts for over 83% of India’s digital payment volume, processing more than 185 billion transactions annually. However, fraud cases surged by 85% in FY24, with 1.34 million incidents and losses exceeding ₹1,087 crore. To tackle this, regulators have implemented device binding, two-factor authentication, daily transaction limits, and AI-powered fraud detection tools like MuleHunter.AI.
Starting June 30, 2025, NPCI mandates that all UPI apps must display only the bank-registered beneficiary name during transactions. This crucial safeguard aims to prevent scams involving fake or misleading payee names, a common tactic used by fraudsters.
The move is expected to enhance transparency and reduce impersonation risks significantly. Additionally, NPCI is encouraging wider adoption of biometric authentication and stricter app security audits. Officials from the Finance Ministry and RBI continue to push for public awareness drives and improved reporting platforms to encourage timely complaint filing.
The Logical Indian’s Perspective
The rising tide of UPI fraud underscores the delicate balance between digital innovation and user security. While India’s digital payment revolution has brought immense convenience and financial inclusion, it has also exposed millions to new risks. The introduction of AI-driven safeguards and regulatory reforms marks progress, but the high rate of underreporting reveals deeper issues of trust and awareness.
At The Logical Indian, we believe that technology must be complemented by empathy, education, and community engagement. Financial literacy initiatives, transparent communication from banks and payment platforms, and user-friendly complaint mechanisms are essential to empower citizens.
Moreover, fostering a supportive environment for victims is crucial to building a safer digital ecosystem. As digital payments become integral to daily life, how can we collectively bridge the trust gap and ensure users feel confident, informed, and protected?
