Melbourne Business School & NXT Fellow 2026
Between 2016 and 2026, India developed and deployed the Unified Payments Interface (UPI) system. Within a decade, it became the largest peer-to-peer payment network in the world and a global model for financial inclusion. UPI has significantly reduced latent financial crime risk in India, contributing to a marked improvement in India’s Financial Action Task Force (FATF) mutual evaluation in 2024. While new scam and fraud risks have emerged, evolving policy responses—including innovative compensation schemes, alongside legal and enforcement reforms—appear well positioned to manage these risks while supporting continued digital adoption.
When India received its first mutual evaluation under the FATF framework in 2010, only 100 million bank cards were issued. By its second evaluation in 2024, UPI alone served over 491 million individuals and 65 million merchants.
UPI has fundamentally reduced India’s reliance on cash, which directly helps to minimize cash-related financial crime. UPI and related initiatives helped to increase bank account ownership from 35.23% in 2011 to around 80% in 2017. This structural change has been accompanied by robust financial inclusion measures, including simplified due diligence for low-risk customers needing support with identification documents, as well as the operation of over 140,000 financial inclusion camps to support widespread digital adoption.
Navigating New Fraud Vectors
This rapid transformation is not without its distinct challenges. As digital payment systems expand, syndicates and criminals adapt quickly to exploit new digital vulnerabilities. From FY23 to FY24, reported cases of digital financial fraud increased by 67%, moving from 2 million to 2.8 million cases. This increase likely reflects the soaring adoption of digital payments, but it also presents an evolving policy challenge.
UPI’s rapid growth requires users to learn unfamiliar digital payment tools at a much greater speed than in Western economies, where digital payment infrastructure developed more gradually. Users can naturally be exposed to harm as they adopt UPI, particularly through phishing, impersonation scams, credential harvesting, fake transfers, or fraudulent QR code substitution.
Strengthening the Consumer Safety Net
Stronger regulatory controls are actively being positioned to protect users and encourage UPI’s long-term growth. A proposed regulatory fraud compensation scheme, when fully implemented, will provide an essential safety net for fraud victims. The RBI’s draft consumer protection regulations provide for refunds of up to 85% of the net loss, or ₹25,000, where a genuine fraud occurs and is reported appropriately. The scheme is designed to be jointly funded by the RBI and the banks responsible for the transaction, effectively incentivizing financial institutions to proactively prevent and respond to fraud.
The FATF observed that despite resource constraints and constitutional challenges, India has substantially improved its investigation and prosecution of offenders for financial crimes and predicate offenses. This substantial progress provides immense confidence that enforcement mechanisms are strengthening in lockstep with digital payment expansion. These institutional safety measures support the continued adoption of digital public infrastructure while reinforcing the core transparency of India’s rapidly digitizing financial system.
