Payment aggregators plan negative database to combat frauds

With the rise in internet penetration and the growing number of online transactions, cases of digital payment fraud have significantly increased.

Written by Sachin Kumar

September 2, 2024 00:10 IST

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Private final consumption expenditure (PFCE) picked up by 12.4 per cent in India in the April-June quarter this fiscal, as against 8.1 per cent in Q1 FY24.

In an effort to address the increasing incidence of payment frauds, payment aggregators are planning to create a negative database containing information on fraudulent transactions involving both customers and merchants.

This database will be a centralised repository of data that can be shared across payment aggregators to help detect and prevent fraud. Currently, there are nearly 60 payment aggregators in the country such as Amazon Pay, Razorpay, PayU Payments, CCAvenue and BillDesk.

With the rise in internet penetration and the growing number of online transactions, cases of digital payment fraud have significantly increased. According to the RBI’s annual report, cases of online payment frauds surged fivefold in 2023-24, with cybercriminals defrauding people of Rs 1,457 crore.

The negative database will be accessible to all licensed payment aggregators. If a fraudster attempts to use the same card or conduct similar fraudulent activities across platforms, payment aggregators can detect the fraud before it affects their systems.

“When we see a particular card number is being used for a lot of frauds, it can be shared with certain other aggregators,” Vishwas Patel, chairman, Payments Council of India, told FE. “If a fraudster uses a skimmed card on one platform and then attempts to use it on another, the payment aggregator would be alerted to the potential fraud.”

This early warning system would help prevent fraudsters from exploiting multiple platforms, which will help reduce the risk for both merchants and consumers, he added.

Similarly, the database would include a negative list of merchants who have been involved in fraudulent activities. Payment aggregators will be able to use the database to screen potential merchants, making sure that they do not onboard individuals or businesses with a history of fraudulent behaviour.

This would prevent a fraudster from simply moving from one payment gateway to another, thus closing a loophole that such merchants exploited in the past. “If one merchant has done a fraud on one payment aggregator’s platform, that will be shared with others,” Patel said.