Tackling digital payment frauds: a study of consumer preparedness in India
| Date | 18 June 2024 |
| Pages | 257-278 |
| DOI | https://doi.org/10.1108/JFC-01-2024-0029 |
| Published date | 18 June 2024 |
| Author | Ameya Lonkar,Sonali Dharmadhikari,Neha Dharurkar,Kanchan Patil,Ravi Ashok Phadke |
Tackling digital payment frauds: a
study of consumer preparedness
in India
Ameya Lonkar and Sonali Dharmadhikari
Institute of Management and Entrepreneurship Development,
Bharati Vidyapeeth (Deemed to be University), Pune, India
Neha Dharurkar and Kanchan Patil
Symbiosis Center for Information Technology,
Symbiosis International (Deemed University), Pune, India, and
Ravi Ashok Phadke
Centre for Distance and Online Education,
Bharati Vidyapeeth (Deemed to be University), Pune, India
Abstract
Purpose –This paper aims to present a study to measure “Consumer Preparedness”(CP) towards digital
payment frauds by considering factorssuch as awareness regarding fraud risk (“Awareness”), implementation of
measures (“Protection”) and actions to be taken in case of fraud (“Responsiveness”).
Design/methodology/approach –This study reviews existing literatureto understand various typologies
of digital payment fraud. The data of 372 consumers was collected using a structured questionnaire. The data
was analyzed using analysis of variance (ANOVA) and Chi-square. CP score was calculated based on awareness
score, protection score and responsiveness score.
Findings –The study shows thatthe score for the level of awareness was low, for the level of protection was
moderate and for the level of responsivenesswas high, leading to an overall moderate level of preparedness.
Further,a moderateassociation was observed between demographicfactors and the level of preparedness.
Practical implications –The authors recommend proactive and reactive measures for Central Banks
regarding central fraud registryand intelligence exchange, consumer fraud vulnerability assessment model
and mandating fraud risk management controls. Further, financial institutions are recommended to permit
payment from registered devices only, implement strong customer authentication (including biometric
authentication)and conduct periodic awareness sessions.
Originality/value –The existing body of knowledge does not have a model or scoring mechanism to
assess the preparedness of consumers to tackle digital payment fraud. The research paper adds a
classificationof fraud typologies and an exploratory approachto measure the CP score.
Keywords Financial crimes, Digital payment frauds, Fraud risk management, Consumer preparedness,
Fintech, Payment security, Fraud awareness
Paper type Research paper
1. Introduction
Technology has impacted how people make and receive payments. The benefits of digital
payments are well beyond convenience as these payments can transform financial lives (World
Bank Development Research Group, the Better Than Cash Alliance, and the Bill and Melinda Gates
Foundation, 2014). Digital payment systems are the backbone of any economy as they enable the
Tackling
digital
payment
frauds
257
Journalof Financial Crime
Vol.32 No. 2, 2025
pp. 257-278
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-01-2024-0029
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1359-0790.htm
movement of money from payer to beneficiary without movement of physical cash or commodities
(Diehl, 2016). Many countries have implemented fast, secu re and convenient digital payment
systems enabling retail payments. Retail payments would include payment tran sactions between
consumers, businesses and public authorities (European Central Bank, 2022). Many countries have
also conducted demonetization in the past. In a recent example, in November 2016, the Government
of India implemented one of the important structural changes in monetary policy in the form of
demonetization. This step dramatically increased the number of digital transact ions. The second
push to the digital transactions was through the outbreak of covid, where payments were carried
out without touching currency notes. The UK observed a fall in automated teller machine (ATM)
withdrawals (Auer et al., 2020) and the Reserve Bank India (RBI) encouraged the use of digital
payments (Reserve Bank of India, 2020a,2020b).
According to data publishedby the RBI, digital payments recorded growth of 57.8%and
19.2% in volume and value terms, respectively, in FY 2022–2023 on top of growth of 63.8%
and 23.1%, in FY 2021–2022. However, this growth is accompanied by growth in digital
payment frauds. Table 1 below explains the growth in digital payment frauds. The
transaction valuesgiven below are in terms of Millions of Indian Rupees (INR Mn).
Further, in FY 2022–2023, frauds related to cards and internet banking accounted for
49.2% of total fraud cases (in terms of volume) as against 39.5% in FY 2021–2022.
Consumers are at the epicenter of such frauds. Various researches (Shin, 2009;Changsu
et al., 2010;Chawla and Joshi, 2019)have also stated that “security”is one of the influencing
factors impacting the adoption of digitalpayments. On the other hand, digital illiteracy and
the risk of digital payment fraud are considered to be challenges in the adoption of digital
payment systems (Bansal, 2017;Borhan and Al-Dalaien, 2017;Ahuja, 2019). Central Banks
and commercial banks continuously take various measures to reduce fraudulent
transactions whichare described in the later section of this paper.
However, the effectiveness of these measures depends on three factors. Those factors are
consumers’level of awareness regarding fraud typologies –“Awareness”, responsible
participation in the implementation of the fraud prevention measures –“Protection”and
appropriate response –“Responsiveness”incase a fraud takes place. These factors taken together
are referred to as “Consumer Preparedness”(CP) in this paper. The same is diagrammatically
represented in Figure 1 below. Hence, an exploratory study of CP towards digital paymentfrauds
was undertaken.
The authors found through data analysis that, in India, although overall “Consumer
Preparedness”is moderate,the level of “awareness”among consumers is low. Since the level
of awareness cannot be increased during a short period of time, additional measures are
recommended by the authorsto tackle digital payment frauds.
Initially, the paper provides detailsabout different types of frauds and various measures
taken to prevent the fraud. The subsequent section deals with data collection and analysis
concerning the preparednessof consumers.
Table 1.
Cards/internet fraud
cases and values
Particulars
Fin. year 2020–2021 Fin. year 2021–2022 Fin. year 2022–2023
Fraud cases Value Fraud cases Value Fraud cases Value
(INR Mn) (INR Mn) (INR Mn)
Cards/internet frauds 2,545 1,190 3,596 1,550 6,659 2,760
YoY* change ––41% 30% 85% 78%
Note: *YoY: year-on-year
Sources: RBI annual report FY 2022–2023 (Reserve Bank of India, 2023) ; Table created by authors
JFC
32,2
258
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