UPI moment in cyberfrauds: Why India’s financial fraud risk indicator is a turning point

The explosive growth of the Unified Payments Interface (UPI) has redefined how India transacts, driving financial inclusion and instant digital payments to every nook and corner of this country. However, with unprecedented scale comes an equally formidable challenge—cyber frauds. As digital payment volumes surge, so do the incidents of phishing, social engineering, and impersonation-based frauds. To address this, the Department of Telecommunications (DoT), in collaboration with key financial and cybercrime stakeholders, has launched the Financial Fraud Risk Indicator (FRI)—a real-time intelligence mechanism that represents a significant inflection point in India’s cyberfraud prevention strategy.

From a fintech leader’s perspective, this isn’t merely another regulatory tool—it’s the early foundation of an intelligence-led, interoperable risk signalling ecosystem. The FRI marks the shift from reactive defence to predictive and pre-emptive protection in digital finance.

UPI’s Scale Demands Embedded Fraud Intelligence

UPI continues to break global records. In May 2025 alone, India processed over ₹70,000 crore and nearly 60 crore UPI transactions in a single day. These figures reflect not just volume but velocity—billions of microtransactions moving across devices and apps in real time. At this scale, manual fraud detection mechanisms are obsolete. Fraud needs to be detected before it happens, not after.

More importantly, as the digital economy expands to tier 2/3 towns and first-time users, fraudsters are leveraging the same scale to exploit consumer vulnerabilities. The rise in social engineering scams, malicious app installs, and deepfake-led impersonation attempts shows that cybercriminals are evolving as quickly as the fintech ecosystem. This is where the FRI framework becomes a strategic necessity.

What Exactly is the Financial Fraud Risk Indicator?

The FRI system assigns a dynamic risk score to a mobile number based on aggregated intelligence across multiple government and private sources. This data is managed under the Digital Intelligence Platform (DIP), a secure backend engine operated by the DoT.

The FRI taps into:

• Sanchar Saathi complaints
• Cybercrime reports
• Phishing and scam reports from users and telcos
• APK-based malware intelligence
• Banking and fintech red-flag data (suspected mule accounts, transaction anomalies, etc.)

Once collated, DIP generates a real-time fraud risk signal—low, medium, or high—that can be queried via an API by any financial institution or payment platform before authorising a transaction. This pre-transaction intelligence has the potential to block or verify high-risk interactions in milliseconds, drastically reducing exposure.

First Real-World Test

In a significant development, PhonePe has become the first payment platform to launch a live pilot integration with FRI via DIP. This pilot enables their risk engines to read the FRI signal at the point of transaction initiation and determine action, such as blocking the transaction, prompting user verification, or flagging the activity internally.

Other major players like Google Pay, Paytm, and Amazon Pay are reportedly in discussions or preparing for phased rollouts, with some expected to go live later in 2025. This signals a wider systemic alignment between telecom intelligence and the financial services industry—a shift long overdue in India’s fragmented fraud ecosystem.

This Is More Than a Policy—It’s a Platform

The real breakthrough is the architecture of FRI: it’s not a standalone fraud database, but a scalable risk signal exchange powered by AI/ML scoring models. It is designed to be interoperable across institutions, platforms, and devices, enabling:

• API-level integration with core banking systems and UPI apps
• Scoring updates as new intelligence comes in (i.e., adaptive intelligence)
• User-driven appeal or rectification mechanisms for wrongly flagged numbers (to be launched)

For fintechs, this is a game changer. Today, many rely on siloed fraud detection models or device-level signals. With DIP-FRI integration, platforms can make decisions based on government-grade intelligence enriched with real-world data from across telecom and digital infrastructure.

This offers several advantages:

• Early detection of fraud attempts, even before a customer reports it
• Lower fraud-related losses and operational strain from chargebacks
• Enhanced compliance with evolving RBI and MeitY risk guidelines
• Increased trust from users, especially first-time and rural customers

What Lies Ahead

The FRI initiative is still in its early innings, but its roadmap is ambitious:

• Full-scale API Access for Banks and NBFCs: Banks, lending apps, and wealth-tech platforms will soon use the DIP-FRI API for onboarding, validations, and fraud mitigation.
• Integration with Aadhaar and PAN Verification Workflows: Aligning with KYC frameworks could enable a multi-factor fraud prevention model.
• Crowdsourced Risk Reporting from Apps: Fintech apps may contribute suspicious activity back to the system, creating a two-way feedback loop.
• Use in Government Subsidy and Welfare Disbursements: FRI can help prevent DBT and pension fraud by identifying mule accounts.
• Convergence with Tokenisation, CBDC and Device Binding: DIP could act as a fraud risk layer for digital currency and token-based payments.
• Cross-Border Risk Intelligence: A federated version could eventually track fraud across borders, especially in remittances.

As we enter a decade where AI-generated fraud, deepfakes, and social engineering will only grow, India needs infrastructure that is intelligent by design, secure by architecture, and interoperable by intent.

The FRI is that infrastructure.

Ramkumar Subburaj

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Ramkumar Subburaj is Chief Technology Officer at Phi Commerce.