Digital Fraud on Fintech Platforms and Its Increase During the Holiday Season

As India gears up for its vibrant festive season, starting with Onam in mid-September and continuing through Diwali, there is an air of excitement and anticipation. The period traditionally marks a time of celebration and increased consumer spending across sectors. The Indian festive season has long been synonymous with shopping and gifting. From cars to consumer goods and groceries, Indian households go wild during this period.

The festive market in India presents a unique landscape where tradition meets innovation. On one hand, the streets are bursting with vibrant colors, with retailers showcasing clothes, groceries, and more. On the other hand, e-commerce platform brands are poised to capitalize on the increased spending patterns that cut across all sections of society.

The holiday season and the online market

The market trend during the festive season goes far beyond just sales numbers. A study by Meesho highlights that over 60% of mass consumers plan to increase their online shopping budget this festive season. This change in consumer behavior aligns perfectly with retailers’ preparations, as 65% of retailers are preparing for the festive season by introducing new products.

As the lines between physical and digital commerce blur, the festive season in India is a stage for innovative marketing strategies and seamless shopping experiences. But amidst the festivities, a growing problem looms: the rise of digital fraud on fintech platforms. The rapid growth of e-commerce, coupled with the widespread adoption of digital payment solutions like the Unified Payments Interface (UPI), has revolutionized consumer shopping behavior and increased the likelihood of financial fraud.

Ways to prevent digital fraud

The digital payments landscape in India has witnessed exponential growth, with transactions increasing from INR 2,071 crore in fiscal year 2017-18 to INR 18,592 crore in fiscal year 2023-24, a CAGR of 44%. However, this digital boom has been accompanied by an alarming rise in cybercrime. In the first four months of 2024 alone, over 7.4 lakh cybercrime complaints were registered, resulting in losses of over Rs 1,750 crore. In May 2024 alone, an average of 7,000 daily cybercrime complaints were reported, with financial frauds accounting for 85% of the cases.

As online transactions increase, fintech platforms become more vulnerable to sophisticated fraud attempts. Let’s look at some ways to mitigate this growing threat.

Behavioral analysis: Using artificial intelligence and machine learning, businesses can detect irregularities in user behavior, flagging potential fraud attempts before they happen.

Multi-factor authentication (MFA): By adding MFA, companies can add strong layers of security to prevent unauthorized access, even if passwords are compromised. This could include a password, fingerprint, a one-time code sent to a phone, or biometrics.

Real-time transaction monitoring: Advanced fraud prevention systems vigilantly monitor transactions in real time and track unusual or suspicious activity.

Continuous system updates: Just as fraudsters strive to stay on top of how cybercrime is being committed, businesses need to stay on top of the latest threat intelligence and patterns to stay ahead of cybercriminals.

The way forward

As the holiday season quickly approaches, businesses and consumers need to be vigilant about digital transactions. Fintech platforms need to invest in robust fraud prevention systems and educate their users about potential threats. Consumers, in turn, should be aware of common fraud tactics and take necessary precautions when making online transactions. By combining advanced technology with user awareness, you can work towards a safer digital ecosystem.