How India Is Using Cutting-Edge AI to Tackle Payment Frauds

K. C. Sabreena Basheer 08 Aug, 2023 • 3 min read

In today’s digital age, frauds related to online transactions are on the rise, posing significant challenges for financial institutions & regulators. The Unique Identification Authority of India (UIDAI) has taken a proactive approach to tackle payment frauds, specifically those related to the Aadhaar-enabled Payment System (AePS). Leveraging the power of artificial intelligence (AI) & machine learning (ML), UIDAI has developed innovative technologies centered around fingerprinting & facial recognition. Let’s delve into how these AI measures are helping in curbing payment fraud and ensuring the safety of your money.

Also Read: AI-Driven ‘Deepfake’ Fraud: Kerala’s Ongoing Battle Against Scammers

Unique Identification Authority of India (UIDAI) is using AI, fingerprinting, and facial recognition to tackle payment fraud.

AI-Powered Fingerprint Minutiae Record – Finger Image Record (FMR-FIR) Modality

To combat the use of cloned fingerprints during Aadhaar authentication, UIDAI has rolled out an in-house AI/ML technology-based FMR-FIR modality. This sophisticated system can distinguish between real or ‘live’ fingerprints, and cloned ones, providing an added layer of security for AePS transactions. By checking the liveness of a fingerprint during authentication, this AI-driven solution has significantly reduced the instances of fraudsters manipulating fingerprint data to access bank accounts unlawfully.

Also Read: How to Detect and Handle Deepfakes in the Age of AI?

UIDAI is using AI & ML based FMR-FIR fingerprinting modality to ensure safe payments.

The Role of Facial Recognition in Transaction Authentication

Collaborating with the National Payments Corporation of India (NPCI), Airtel Payments Bank joined hands with UIDAI to introduce a facial recognition-based authentication measure for AePS transactions. This cutting-edge facial recognition technology, developed in-house by UIDAI, further enhances the security of digital transactions. It verifies the user’s identity through facial features, ensuring that only genuine individuals can carry out financial transactions, effectively thwarting fraudsters attempting to exploit the system.

The scale of payment fraud in India has been on an alarming rise, as reported by the Home Ministry and the Standing Committee on Finance. The financial year 2020-21 witnessed 2.62 lacks reported cases of various financial crimes, while in 2022, it soared to a staggering 6.94 lakhs. Among these, payment-related frauds experienced a dramatic increase, reaching almost 20 million cases in FY23. These statistics underscore the pressing need for robust AI-based solutions to safeguard digital transactions and protect users from potential cybercrimes.

Also Read: FraudGPT: The Alarming Rise of AI-Powered Cybercrime Tools

Payment frauds and cybercrime is on the rise in India.

The Challenge of Business Correspondents

While AI-based technologies have proven effective in preventing certain types of fraud, they are not without limitations. One significant challenge is dealing with fraud perpetrated by business correspondents (BCs). These are informal bank agents equipped with biometric Point-of-Sale (PoS) machines acting as micro ATMs. In certain instances, BCs misrepresent the amount disbursed to individuals, leaving them vulnerable to financial exploitation. The lack of awareness, especially in rural areas, exacerbates the situation, making educating users about safe banking practices crucial.

Also Read: Cybercriminals Use WormGPT to Breach Email Security

UIDAI’s Ongoing Efforts to Combat AePS Frauds

UIDAI remains committed to staying ahead of fraudsters by continuously refining its AI-based solutions. The agency actively investigates complaints related to AePS transactions, with over 2,000 complaints received between November 2021 and March 2023. By collaborating with banks, government agencies, and other stakeholders, UIDAI aims to fortify the security of digital payment systems and maintain the trust of millions of users across India.

Also Read: Airtel Develops AI Tool to Identify Fraudulent Phishing Messages

Our Say

In a rapidly digitizing world, the importance of safeguarding digital transactions cannot be overstated. UIDAI’s adoption of AI and ML technologies in combating payment fraud marks a significant step forward in securing the financial interests of millions of Indians. The UIDAI is leading the way in ensuring a safer and more secure digital payment ecosystem through innovative measures like the FMR-FIR modality and facial recognition. As we navigate the complexities of the digital landscape, let us embrace these advancements and collaborate to protect ourselves and our hard-earned money from the clutches of cybercriminals. Together, we can build a safer and more trustworthy digital future.

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