Majority of digital payment fraud is tied to UPI in India, study shows

By Puja Sharma

Bureau, a no-code decisioning platform that delivers accurate conclusions about the trustworthiness of digital identities, today unveiled the results of a first-of-its-kind study titled: ‘The Anatomy of Fraud 2023’. The Anatomy of Fraud provides insights into the size of and drivers behind digital fraud in India and Southeast Asia against a backdrop of the global Digital Economy.

The report revealed that of the total reported digital payment fraud, ~55% is UPI-related. While the attack volume is massive the financial impact is relatively low. Half of the UPI-related fraud attacks tend to be low-ticket size (less than INR 10K).

The study also shows that account-related fraud attacks – like ATOs and fake account registrations – are the preferred types of overall fraudulent activity taking place in India. Customer journey verification and striking a balance between security and CX are the top challenges businesses face in detecting these account-related fraud types. For example, in financial services, account-related fraud makes up ~65% of all types of fraud being perpetrated. In e-commerce, that share equals ~54%.

“We undertook this study with rigour to discover the magnitude of digital fraud, its effect on the Digital Economy, and to add to the body of knowledge about attack types and solutions,” said Bureau founder and CEO Ranjan R. Reddy. “The findings are timely.

The digital economy runs on digital identities, and fraudsters are banking on that. Not being able to discern which digital identities are trustworthy is the inflection point between growth and failure. All it takes is for one bad actor to launch a successful digital-fraud incursion for businesses to lose consumer trust, brand equity, and revenue – for good.”

Additionally, the study notes that the urgency among businesses to curb digital fraud and invest in modern fraud detection and prevention practices is set to increase by 400% between now and 2027. The total addressable fraud detection and prevention market will reach $7.6bn in less than four years with a 37% CAGR, far surpassing the 2022 $1.5bn amount.

The investment is warranted. It’s easier today for people to take up digital fraud as a lucrative career or side hustle. The fraudster community is well-organised. Groups on the dark web and Telegram forums house marketplaces where people can buy “plug and play” fraud technology offer tutorials on how to carry out certain types of attacks and share information about which companies to target. Fraudsters no longer have to be tech-savvy to launch harmful bot attacks and Generative AI makes social engineering and phishing scams that much more convincing, thus harder to know which digital identities are real.

The Indian government is being proactive. Its fraud mitigation initiatives (i.e. stringent KYC processes across digital segments, new regulations for the real-money gaming sector, etc.) are ensuring businesses protect themselves and their consumers.

Financially-motivated fraudsters focus on high-value targets. For example, India’s Banking, Financial Services, and Insurance (BFSI) sector is in the cross-hairs, which is one reason why it holds the largest share of collective investment in fraud detection and prevention solutions at more than 70%, followed immediately by the robust e-commerce sector (~24%).

Reddy said: “Fraudsters go where the money and opportunity are. The rising digitization, digital inclusion expansion, and a growing number of digital-first businesses suggest India is going to continue to be a hotbed of digital fraud.”

Bureau conducted ‘The Anatomy of Fraud 2023’ survey in association with renowned research and consulting firm, Praxis, to study the impact of digital fraud globally, especially in India and Southeast Asia (SEA), to address the increasing significance of FDP in the global marketplace.

Key Highlights

• Indian businesses get serious about curbing digital fraud by increasing investments by 400%+ over 2022 figures
• Quest is on to protect Indian consumers from online account takeovers, fake account registrations using synthetic identities, and transaction fraud
• Banking, Financial Services, and Insurance segments are high-value targets and makeup 70%+ of anti-fraud investment; followed by e-commerce at ~24%
• ~55% of Payment Fraud are UPI-related