AN OVERVIEW OF DIGITAL PAYMENT FRAUDS: CAUSES, CONSEQUENCES, AND COUNTERMEASURES

Abstract

Digital payment is a double edge sword, the widespread adoption of digital payments has enhanced financial transactions, but it has also led to a rise in digital payment frauds, posing challenges to individuals and financial institutions. This study aims to identify and analyze the underlying causes of digital payment frauds, compare perceptions between victims and non-victims, evaluate countermeasures, and examine the government’s role in fraud prevention. A primary study was conducted in Varanasi district, collecting primary data from 280 respondents (118 victims and 132 non-victims) through a structured questionnaire, while secondary data was sourced from RBI reports and financial publications and the data was analyzed using appropriate statistical tools such as Mann-Whitney U test, Wilcoxon rank-sum test, and Friedman test. The findings indicate that financial illiteracy, low awareness, cybersecurity vulnerabilities, and technological complexity are key fraud drivers. Victims emphasize financial illiteracy and technology complexity, while non-victims highlight cybersecurity flaws and slow investigations. Awareness and education emerged as the most effective countermeasures, followed by strict regulations and security intelligence, while emerging technologies like sound wave authentication and network tokenization were perceived as less effective. The study suggests AI-driven fraud detection, biometric authentication, cybersecurity frameworks, and fraud intelligence sharing as essential strategies for improving digital payment security, requiring a multi-stakeholder approach involving consumers, financial institutions, and regulators.